[ü] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2010
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to

Commission file number:

1-6523

Exact Name of Registrant as Specified in its Charter:
Bank of America Corporation

State or Other Jurisdiction of Incorporation or Organization:
Delaware

Former name, former address and former fiscal year, if changed since last report:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes ü No

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).

Yes ü No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act
(check one).

Large accelerated filer ü

Accelerated filer

Non-accelerated filer
(do not check if a smaller
reporting company)

Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule
12b-2).

Yes No ü

On
July 31, 2010, there were 10,033,844,854 shares of Bank of America Corporation Common Stock
outstanding.

Reconciliation of net income to net cash provided by operating activities:

Provision for credit losses

17,910

26,755

Gains on sales of debt securities

(771

)

(2,130

)

Depreciation and premises improvements amortization

1,113

1,169

Amortization of intangibles

885

1,036

Deferred income tax expense

1,264

247

Net decrease in trading and derivative instruments

32,108

41,190

Net decrease in other assets

3,205

23,267

Net increase (decrease) in accrued expenses and other liabilities

2,518

(18,629

)

Other operating activities, net

(25,186

)

(5,605

)

Net cash provided by operating activities

39,351

74,771

Investing activities

Net decrease in time deposits placed and other short-term investments

3,561

17,573

Net (increase) decrease in federal funds sold and securities borrowed or
purchased under agreements to resell

(57,734

)

36,617

Proceeds from sales of available-for-sale debt securities

63,356

77,402

Proceeds from paydowns and maturities of available-for-sale debt securities

36,458

31,900

Purchases of available-for-sale debt securities

(99,704

)

(43,670

)

Proceeds from maturities of held-to-maturity debt securities

3

795

Purchases of held-to-maturity debt securities

(100

)

(1,819

)

Proceeds from sales of loans and leases

3,525

5,846

Other changes in loans and leases, net

19,657

8,646

Net purchases of premises and equipment

(149

)

(1,240

)

Proceeds from sales of foreclosed properties

1,342

851

Cash received upon acquisition, net

-

31,804

Cash received due to impact of adoption of new consolidation guidance

2,807

-

Other investing activities, net

6,905

9,209

Net cash provided by (used in) investing activities

(20,073

)

173,914

Financing activities

Net decrease in deposits

(17,144

)

(10,362

)

Net increase (decrease) in federal funds purchased and securities loaned
or sold under agreements to repurchase

52,026

(54,539

)

Net decrease in commercial paper and other short-term borrowings

(18,303

)

(99,715

)

Proceeds from issuance of long-term debt

38,920

42,635

Retirement of long-term debt

(44,157

)

(60,228

)

Proceeds from issuance of preferred stock

-

30,000

Proceeds from issuance of common stock

-

13,468

Cash dividends paid

(890

)

(2,385

)

Excess tax benefits of share-based payments

47

-

Other financing activities, net

(34

)

(18

)

Net cash provided by (used in) financing activities

10,465

(141,144

)

Effect of exchange rate changes on cash and cash equivalents

(48

)

(32

)

Net increase in cash and cash equivalents

29,695

107,509

Cash and cash equivalents at January 1

121,339

32,857

Cash and cash equivalents at June 30

$

151,034

$

140,366

During the six months ended June 30, 2009, the Corporation exchanged $14.8 billion of preferred stock by issuing approximately 1.0 billion shares of
common stock valued at $11.5 billion.

During the six months ended June 30, 2009, the Corporation transferred $1.7 billion of ARS from trading account assets to available-for-sale (AFS) debt
securities.

During the six months ended June 30, 2009, the Corporation exchanged credit card loans of $8.5 billion and the related allowance for loan and lease losses
of $750 million for a $7.8 billion held-to-maturity debt security that was issued by the Corporations U.S. credit card securitization trust and retained
by the Corporation.

The acquisition-date fair values of noncash assets acquired and liabilities assumed in the Merrill Lynch acquisition were $619.1 billion and $626.8 billion.

Approximately 1.4 billion shares of common stock valued at approximately $20.5 billion and 376 thousand shares of preferred stock valued at approximately
$8.6 billion were issued in connection with the Merrill Lynch acquisition.

Bank of America Corporation (collectively, with its subsidiaries, the Corporation), a
financial holding company, provides a diverse range of financial services and products throughout
the U.S. and in certain international markets. The Corporation conducts
these activities through its banking and nonbanking subsidiaries. On January 1, 2009, the
Corporation acquired Merrill Lynch & Co. Inc. (Merrill Lynch) in exchange for common and preferred
stock with a value of $29.1 billion. On July 1, 2008, the Corporation acquired Countrywide
Financial Corporation (Countrywide) in exchange for common stock with a value of $4.2 billion. At
June 30, 2010, the Corporation operated its banking activities primarily under two charters: Bank
of America, National Association (Bank of America, N.A.) and FIA Card Services, N.A. In connection
with certain acquisitions including Merrill Lynch and Countrywide, the Corporation acquired
banking subsidiaries that have been merged into Bank of America, N.A. with no impact on the
Consolidated Financial Statements of the Corporation.

Principles of Consolidation and Basis of Presentation

The Consolidated Financial Statements include the accounts of the Corporation and its
majority-owned subsidiaries, and those variable interest entities (VIEs) where the Corporation is
the primary beneficiary. Intercompany accounts and transactions have been eliminated. Results of
operations, assets and liabilities of acquired companies are included from the dates of
acquisition. Results of operations, assets and liabilities of VIEs are included from the date that
the Corporation became the primary beneficiary. Assets held in an agency or fiduciary capacity are
not included in the Consolidated Financial Statements. The Corporation accounts for investments in
companies for which it owns a voting interest of 20 percent to 50 percent and for which it has the
ability to exercise significant influence over operating and financing decisions using the equity
method of accounting. These investments are included in other assets and are subject to impairment
testing. The Corporations proportionate share of income or loss is included in equity investment
income.

The preparation of the Consolidated Financial Statements in conformity with accounting
principles generally accepted in the United States of America (GAAP) requires management to make
estimates and assumptions that affect reported amounts and disclosures. Realized results could
differ from those estimates and assumptions.

These unaudited Consolidated Financial Statements should be read in conjunction with the
audited Consolidated Financial Statements included in the Corporations 2009 Annual Report on Form
10-K. The nature of the Corporations business is such that the results of any interim period are
not necessarily indicative of results for a full year. In the opinion of management, all
adjustments, which consist of normal recurring adjustments necessary for a fair statement of the
interim period results have been made. Certain prior period amounts have been reclassified to
conform to current period presentation.

New Accounting Pronouncements

In March 2010, the Financial Accounting Standards Board (FASB) issued new accounting
guidance on embedded credit derivatives. This new accounting guidance clarifies the scope
exception for embedded credit derivatives and defines which embedded credit derivatives are
required to be evaluated for bifurcation and separate accounting. This new accounting guidance was
effective on July 1, 2010. Upon adoption, companies may elect the fair value option for any
beneficial interests, including those that would otherwise require bifurcation under the new
guidance. In connection with the adoption on July 1, 2010, the Corporation elected the fair value
option for $629 million of debt securities, principally collateralized debt obligations (CDOs),
that otherwise may be subject to bifurcation under the new guidance. Accordingly, the Corporation
recorded a $232 million charge to retained earnings on July 1, 2010 to reflect the after-tax
cumulative effect of the change.

In July 2010, the FASB issued new accounting guidance
that requires additional disclosures about a companys allowance for credit losses and the credit
quality of the loan portfolio. The additional disclosures include a rollforward of the allowance
for credit losses on a disaggregated basis and more information, by type of receivable, on credit
quality indicators including aging and troubled debt restructurings as well as significant
purchases and sales. These new disclosures are effective for the 2010 annual report.
This new accounting guidance does not change the accounting model, and accordingly,
will have no impact on the Corporations consolidated results of operations or
financial position.

On January 1, 2010, the Corporation adopted new FASB accounting guidance on transfers of
financial assets and consolidation of VIEs. This new accounting guidance revises sale accounting
criteria for transfers of financial assets, including elimination of the concept of and accounting
for qualifying special purpose entities (QSPEs), and significantly changes the criteria for
consolidation of a VIE. The adoption of this new accounting guidance resulted in the consolidation
of certain VIEs that previously were QSPEs and VIEs that were not recorded on the Corporations
Consolidated Balance

Sheet prior to January 1, 2010. The adoption of this new accounting guidance
resulted in a net incremental increase in assets of $100.4 billion and a net increase in
liabilities of $106.7 billion. These amounts are net of retained interests in securitizations held
on the Consolidated Balance Sheet at December 31, 2009 and net of a $10.8 billion increase in the
allowance for loan and lease losses. The Corporation recorded a $6.2 billion charge, net of tax,
to retained earnings on January 1, 2010 for the cumulative effect of the adoption of this new
accounting guidance, which resulted principally from the increase in the allowance for loan and
lease losses, and a $116 million charge to accumulated other comprehensive income (OCI). Initial
recording of these assets, related allowance and liabilities on the Corporations Consolidated
Balance Sheet had no impact at the date of adoption on the consolidated results of operations.

Application of the new consolidation guidance has been deferred indefinitely for certain
investment funds managed on behalf of third parties if the Corporation does not have an obligation
to fund losses that could potentially be significant to these funds.
Application of the new consolidation guidance has also been deferred if the funds must comply with
guidelines similar to those included in Rule 2a-7 of the Investment Company Act of 1940 for
registered money market funds. These funds, which include the cash funds managed within Global
Wealth & Investment Management (GWIM), will continue to be evaluated for consolidation in
accordance with the prior guidance.

On January 1, 2010, the Corporation elected to early adopt, on a prospective basis, new FASB
accounting guidance stating that troubled debt restructuring (TDR) accounting cannot be applied to
individual loans within purchased credit-impaired loan pools. The adoption of this guidance did
not have a material impact on the Corporations financial condition or results of operations.

On January 1, 2010, the Corporation adopted new FASB accounting guidance that requires
disclosure of gross transfers into and out of Level 3 of the fair value hierarchy and adds a
requirement to disclose significant transfers between Level 1 and Level 2 of the fair value
hierarchy. The new accounting guidance also clarifies existing disclosure requirements regarding
the level of disaggregation of fair value measurements and inputs, and valuation techniques. These
enhanced disclosures required under this new guidance are included in Note 14  Fair Value
Measurements. Beginning in 2011, this new accounting guidance also requires separate presentation
of purchases, issuances and settlements in the Level 3 reconciliation table.

Significant Accounting Policies

Securities Financing Agreements

Securities borrowed or purchased under agreements to resell and securities loaned or sold
under agreements to repurchase (securities financing agreements) are treated as collateralized
financing transactions. These agreements are recorded at the amounts at which the securities were
acquired or sold plus accrued interest, except for certain securities financing agreements that
the Corporation accounts for under the fair value option. Changes in the value of securities
financing agreements that are accounted for under the fair value
option are recorded in other
income. For more information on securities financing agreements that the Corporation accounts for
under the fair value option, see Note 14  Fair Value Measurements.

The Corporations policy is to obtain possession of collateral with a market value equal to
or in excess of the principal amount loaned under resale agreements. To ensure that the market
value of the underlying collateral remains sufficient, collateral is generally valued daily and
the Corporation may require counterparties to deposit additional collateral or may return
collateral pledged when appropriate.

Substantially all securities financing agreements are transacted under master repurchase
agreements which give the Corporation, in the event of default by the counterparty, the right to
liquidate securities held and to offset receivables and payables with the same counterparty. The
Corporation offsets securities financing agreements with the same counterparty on the Consolidated
Balance Sheet where it has such a master agreement. In transactions where the Corporation acts as
the lender in a securities lending agreement and receives securities that can be pledged or sold
as collateral, it recognizes an asset on the Consolidated Balance Sheet at fair value,
representing the securities received, and a liability for the same amount, representing the
obligation to return those securities.

At
the end of certain quarterly periods during the three years ended December 31, 2009, the
Corporation had recorded certain sales of agency mortgage-backed securities (MBS) which, based on
a more recent internal review and interpretation, should have been recorded as secured borrowings.
These periods and amounts were as follows: March 31, 2009  $573 million; September 30, 2008 
$10.7 billion; December 31, 2007  $2.1 billion;
and March 31, 2007  $4.5 billion. As the

transferred securities were recorded at fair value in trading account assets, the change would
have had no impact on consolidated results of operations. Had the sales been recorded as secured
borrowings, trading account assets and federal funds purchased and securities loaned or sold under
agreements to repurchase would have increased by the amount of the transactions, however, the
increase in all cases was less than 0.7 percent of total assets or total liabilities. Accordingly,
the Corporation believes that these transactions did not have a material impact on the
Corporations Consolidated Financial Statements.

In repurchase transactions, typically, the termination date for a repurchase agreement is
before the maturity date of the underlying security. However, in certain situations, the
Corporation may enter into repurchase agreements where the termination date of the repurchase
transaction is the same as the maturity date of the underlying security and these transactions are
referred to as repo-to-maturity (RTM) transactions. The Corporation enters into RTM transactions
only for high quality, very liquid securities such as U.S. Treasury securities or securities
issued by government-sponsored enterprises (GSE). The Corporation accounts for RTM transactions as
sales in accordance with GAAP, and accordingly, removes the
securities from the Consolidated Balance Sheet and
recognizes a gain or loss in the Consolidated Statement of Income. At June 30, 2010, the
Corporation had no outstanding RTM transactions compared to $6.5 billion at December 31, 2009,
that had been accounted for as sales.

Variable Interest Entities

The entity that has a controlling financial interest in a VIE is referred to as the primary
beneficiary and consolidates the VIE. Prior to January 1, 2010, the primary beneficiary was the
entity that would absorb a majority of the economic risks and rewards of the VIE based on an
analysis of projected probability-weighted cash flows. In accordance with the new accounting
guidance on consolidation of VIEs and transfers of financial assets (new consolidation guidance)
effective January 1, 2010, the Corporation is deemed to have a controlling financial interest and
is the primary beneficiary of a VIE if it has both the power to direct the activities of the VIE
that most significantly impact the VIEs economic performance and an obligation to absorb losses
or the right to receive benefits that could potentially be significant to the VIE. On a quarterly
basis, the Corporation reassesses whether it has a controlling financial interest in and is the
primary beneficiary of a VIE. The quarterly reassessment process considers whether the Corporation
has acquired or divested the power to direct the activities of the VIE through changes in
governing documents or other circumstances. The reassessment also considers whether the
Corporation has acquired or disposed of a financial interest that could be significant to the VIE,
or whether an interest in the VIE has become significant or is no longer significant. The
consolidation status of the VIEs with which the Corporation is involved may change as a result of
such reassessments.

Retained interests in securitized assets are initially recorded at fair value. Prior to 2010,
retained interests were initially recorded at an allocated cost basis in proportion to the
relative fair values of the assets sold and interests retained. In addition, the Corporation may
invest in debt securities issued by unconsolidated VIEs. Quoted market prices are primarily used
to obtain fair values of these debt securities, which are classified
in available-for-sale (AFS) debt securities or
trading account assets. Generally, quoted market prices for retained residual interests are not
available, therefore, the Corporation estimates fair values based on the present value of the
associated expected future cash flows. This may require management to estimate credit losses,
prepayment speeds, forward interest yield curves, discount rates and other factors that impact the
value of retained interests. Retained residual interests in unconsolidated securitization trusts
are classified in trading account assets or other assets with changes in fair value recorded in
income. The Corporation may also purchase credit protection from unconsolidated VIEs in the form
of credit default swaps or other derivatives, which are carried at fair value with changes in fair
value recorded in income.

NOTE 2 - Merger and Restructuring Activity

Merrill Lynch

On January 1, 2009, the Corporation acquired Merrill Lynch through its merger with a
subsidiary of the Corporation in exchange for common and preferred stock with a value of $29.1
billion. Under the terms of the merger agreement, Merrill Lynch common shareholders received
0.8595 of a share of Bank of America Corporation common stock in exchange for each share of
Merrill Lynch common stock. In addition, Merrill Lynch non-convertible preferred shareholders
received Bank of America Corporation preferred stock having substantially identical terms. Merrill
Lynch convertible preferred stock remains outstanding and is convertible into Bank of America
Corporation common stock at an equivalent exchange ratio.

The purchase price was allocated to the acquired assets and liabilities based on their
estimated fair values at the Merrill Lynch acquisition date as summarized in the following table.
Goodwill of $5.1 billion was calculated as the purchase premium after adjusting for the fair value
of net assets acquired. No goodwill is deductible for federal income tax purposes. The goodwill
was allocated principally to the GWIM and Global Banking & Markets (GBAM) business segments.

Merrill Lynch Purchase Price Allocation

(Dollars in billions, except per share amounts)

Purchase price

Merrill Lynch common shares exchanged (in millions)

1,600

Exchange ratio

0.8595

The Corporations common shares issued (in millions)

1,375

Purchase price per share of the Corporations common stock (1)

$

14.08

Total value of the Corporations common stock and cash exchanged for
fractional shares

The value of the shares of common stock exchanged with
Merrill Lynch shareholders was based upon the closing price of the
Corporations common stock at December 31, 2008, the last trading day prior to
the date of acquisition.

(2)

Consists of trade name of $1.5 billion and customer relationship
and core deposit intangibles of $3.9 billion. The amortization life is 10 years
for the customer relationship and core deposit intangibles which are primarily
amortized on a straight-line basis.

Merger and Restructuring Charges and Reserves

Merger and restructuring charges are recorded in the Consolidated Statement of Income
and include incremental costs to integrate the operations of the Corporation and its recent
acquisitions. These charges represent costs associated with these one-time activities and do not
represent ongoing costs of the fully integrated combined organization. On January 1, 2009, the
Corporation adopted new accounting guidance on business combinations, on a prospective basis, that
requires that acquisition-related transaction and restructuring costs be charged to expense as
incurred. Previously, these expenses were recorded as an adjustment to goodwill.

The following table presents severance and employee-related charges, systems integrations and
related charges, and other merger-related charges.

Three Months Ended

Six Months Ended

June 30

June 30

(Dollars in millions)

2010

2009

2010

2009

Severance and employee-related charges

$

123

$

491

$

274

$

982

Systems integrations and related charges

329

292

639

484

Other

56

46

116

128

Total merger and restructuring charges

$

508

$

829

$

1,029

$

1,594

For the three and six months ended June 30, 2010, merger and restructuring charges
consisted of $424 million and $832 million related to the Merrill Lynch acquisition and $84
million and $197 million related to the Countrywide acquisition. For the three and six months
ended June 30, 2009, merger and restructuring charges consisted primarily of $580 million

and $1.1
billion related to the Merrill Lynch acquisition, $227 million and $420 million related to the
Countrywide acquisition, and $22 million and $81 million related to previous acquisitions.

For the three and six months ended June 30, 2010, $424 million and $832 million of
merger-related charges for the Merrill Lynch acquisition included $112 million and $234 million of
severance and other employee-related costs, $259 million and $497 million of system integration
costs, and $53 million and $101 million of other merger-related costs. For the three and six
months ended June 30, 2009, $580 million and $1.1 billion of merger-related charges for the
Merrill Lynch acquisition included $448 million and $880 million of severance and other
employee-related costs, $103 million and $141 million of system integration costs, and $29 million
and $72 million of other merger-related costs.

The following table presents the changes in exit cost and restructuring reserves for the
three and six months ended June 30, 2010 and 2009. Exit cost reserves were established in purchase
accounting resulting in an increase in goodwill. Restructuring reserves are established by a
charge to merger and restructuring charges, and the restructuring charges are included in the
total merger and restructuring charges in the table above. Exit costs were not recorded in
purchase accounting for the Merrill Lynch acquisition in accordance with new accounting guidance
on business combinations which was effective January 1, 2009.

Exit Cost Reserves

Restructuring Reserves

(Dollars in millions)

2010

2009

2010

2009

Balance, January 1

$

112

$

523

$

403

$

86

Exit costs and restructuring charges:

Merrill Lynch

n/a

n/a

106

382

Countrywide

-

-

30

60

Cash payments and other

(22

)

(192

)

(294

)

(136

)

Balance, March 31

90

331

245

392

Exit costs and restructuring charges:

Merrill Lynch

n/a

n/a

93

350

Countrywide

(18

)

-

23

48

Cash payments and other

(35

)

(113

)

(101

)

(360

)

Balance, June 30

$

37

$

218

$

260

$

430

n/a = not applicable

At December 31, 2009, there were $112 million of exit cost reserves related principally
to the Countrywide acquisition, including $70 million of severance, relocation and other
employee-related costs and $42 million for contract terminations. Cash payments and other of $35
million during the three months ended June 30, 2010 consisted of $13 million in severance,
relocation and other employee-related costs, and $22 million in contract terminations. Cash
payments and other of $57 million during the six months ended June 30, 2010 consisted of $20
million in severance, relocation and other employee-related costs, and $37 million in contract
terminations. At June 30, 2010, exit cost reserves of $37 million related principally to
Countrywide.

At December 31, 2009, there were $403 million of restructuring reserves related to the
Merrill Lynch and Countrywide acquisitions for severance and other employee-related costs. For the
three and six months ended June 30, 2010, $116 million and $252 million were added to the
restructuring reserves related to severance and other employee-related costs primarily associated
with the Merrill Lynch acquisition. Cash payments and other of $101 million and $395 million
during the three and six months ended June 30, 2010 were all related to severance and other
employee-related costs. Payments associated with the Countrywide and Merrill Lynch acquisitions
are expected to continue into 2012. At June 30, 2010, restructuring reserves of $260 million
consisted of $188 million for Merrill Lynch and $72 million for Countrywide.

Derivatives are held for trading, as economic hedges, or as qualifying accounting
hedges. The Corporation enters into derivatives to facilitate client transactions, for principal
trading purposes and to manage risk exposures. For additional information on the Corporations
derivatives and hedging activities, see Note 1  Summary of Significant Accounting Principles to
the Consolidated Financial Statements of the Corporations 2009 Annual Report on Form 10-K. The
following table identifies derivative instruments included on the Corporations Consolidated
Balance Sheet in derivative assets and liabilities at June 30, 2010 and December 31, 2009.
Balances are provided on a gross basis, prior to the application of counterparty and collateral
netting. Total derivative assets and liabilities are adjusted on an aggregate basis to take into
consideration the effects of legally enforceable master netting agreements and have been reduced
by the cash collateral applied.

June 30, 2010

Gross Derivative Assets

Gross Derivative Liabilities

Trading

Trading

Derivatives

Derivatives

and

Qualifying

and

Qualifying

Contract/

Economic

Accounting

Economic

Accounting

(Dollars
in billions)

Notional(1)

Hedges

Hedges(2)

Total

Hedges

Hedges(2)

Total

Interest rate contracts

Swaps

$

43,600.3

$

1,470.3

$

11.1

$

1,481.4

$

1,454.6

$

1.9

$

1,456.5

Futures and forwards

12,542.3

5.6

-

5.6

7.2

-

7.2

Written options

3,004.8

-

-

-

90.0

-

90.0

Purchased options

2,699.4

93.6

-

93.6

-

-

-

Foreign exchange contracts

Swaps

616.6

25.1

2.3

27.4

29.7

3.0

32.7

Spot, futures and forwards

2,334.8

38.3

-

38.3

40.2

-

40.2

Written options

477.4

-

-

-

14.5

-

14.5

Purchased options

466.7

14.0

-

14.0

-

-

-

Equity contracts

Swaps

47.1

1.8

-

1.8

2.3

-

2.3

Futures and forwards

98.0

3.3

-

3.3

2.6

-

2.6

Written options

263.8

-

-

-

25.2

-

25.2

Purchased options

229.8

25.4

-

25.4

-

-

-

Commodity contracts

Swaps

94.8

6.5

0.2

6.7

6.3

-

6.3

Futures and forwards

464.2

6.8

-

6.8

6.4

-

6.4

Written options

71.6

-

-

-

5.0

-

5.0

Purchased options

69.5

4.8

-

4.8

-

-

-

Credit derivatives

Purchased credit derivatives:

Credit default swaps

2,423.0

111.2

-

111.2

22.8

-

22.8

Total return swaps/other

21.2

1.2

-

1.2

0.9

-

0.9

Written credit derivatives:

Credit default swaps

2,421.3

22.4

-

22.4

104.6

-

104.6

Total return swaps/other

23.3

1.4

-

1.4

0.4

-

0.4

Gross derivative
assets/liabilities

$

1,831.7

$

13.6

1,845.3

$

1,812.7

$

4.9

1,817.6

Less: Legally enforceable master
netting agreements

(1,699.1

)

(1,699.1

)

Less: Cash collateral applied

(62.9

)

(55.7

)

Total derivative
assets/liabilities

$

83.3

$

62.8

(1)

Represents the total contract/notional amount of the derivatives outstanding and includes both written and purchased credit derivatives.

The Corporations asset and liability management (ALM) and risk management activities
include the use of derivatives to mitigate risk to the Corporation including both derivatives that
are designated as hedging instruments and economic hedges. Interest rate, commodity, credit and
foreign exchange contracts are utilized in the Corporations ALM and risk management activities.

The Corporation maintains an overall interest rate risk management strategy that incorporates
the use of interest rate contracts, which are generally non-leveraged generic interest rate and
basis swaps, options, futures and forwards, to minimize significant fluctuations in earnings that
are caused by interest rate volatility. Interest rate contracts are used by the Corporation in the
management of its interest rate risk position. The Corporations goal is to manage interest rate
sensitivity so that movements in interest rates do not significantly adversely affect earnings. As
a result of interest rate fluctuations, hedged fixed-rate assets and liabilities appreciate or
depreciate in fair value. Gains or losses on the derivative instruments that are linked to the
hedged fixed-rate assets and liabilities are expected to substantially offset this unrealized
appreciation or depreciation.

Interest rate and market risk can be substantial in the mortgage business. Market risk is the
risk that values of mortgage assets or revenues will be adversely affected by changes in market
conditions such as interest rate movements. To hedge interest rate risk in
mortgage banking production income, the Corporation utilizes forward loan sale commitments and
other derivative instruments including purchased options. The Corporation also utilizes
derivatives such as interest rate options, interest rate swaps, forward settlement contracts and
euro-dollar futures as economic hedges of the fair value of mortgage servicing rights (MSRs). For
additional information on MSRs, see Note 16 - Mortgage Servicing Rights.

The Corporation uses foreign currency contracts to manage the foreign exchange risk
associated with certain foreign currency-denominated assets and liabilities, as well as the
Corporations investments in foreign subsidiaries. Foreign exchange contracts, which include spot
and forward contracts, represent agreements to exchange the currency of one country for the
currency of another country at an agreed-upon price on an agreed-upon settlement date. Exposure to
loss on these contracts will increase or decrease over their respective lives as currency exchange
and interest rates fluctuate.

The Corporation enters into derivative commodity contracts such as futures, swaps, options
and forwards as well as non-derivative commodity contracts to provide price risk management
services to customers or to manage price risk associated with its physical and financial commodity
positions. The non-derivative commodity contracts and physical inventories of commodities expose
the Corporation to earnings volatility. Cash flow and fair value accounting hedges provide a
method to mitigate a portion of this earnings volatility.

The Corporation purchases credit derivatives to manage credit risk related to certain funded
and unfunded credit exposures. Credit derivatives include credit default swaps, total return swaps
and swaptions. These derivatives are accounted for as economic hedges and changes in fair value
are recorded in other income.

The Corporation uses various types of interest rate, commodity and foreign exchange
derivative contracts to protect against changes in the fair value of its assets and liabilities
due to fluctuations in interest rates, exchange rates and commodity prices (fair value hedges).
The Corporation also uses these types of contracts and equity derivatives to protect against
changes in the cash flows of its assets and liabilities, and other forecasted transactions (cash
flow hedges). The Corporation hedges its net investment in consolidated foreign operations
determined to have functional currencies other than the U.S. dollar using forward exchange
contracts, cross-currency basis swaps, and by issuing foreign currency-denominated debt (net
investment hedges).

The following table summarizes certain information related to the Corporations derivatives
designated as fair value hedges for the three and six months ended June 30, 2010 and 2009.

Amounts Recognized in Income for the Three Months Ended June 30

2010

2009

Hedged

Hedge

Hedged

Hedge

(Dollars in millions)

Derivative

Item

Ineffectiveness

Derivative

Item

Ineffectiveness

Derivatives designated as fair value hedges

Interest rate risk on long-term debt (1)

$

3,202

$

(3,318

)

$

(116

)

$

(3,851

)

$

3,529

$

(322

)

Interest rate and foreign currency risk on long-term debt (1)

(1,907

)

1,704

(203

)

1,014

(987

)

27

Interest rate risk on available-for-sale securities (2, 3)

(5,240

)

5,165

(75

)

207

(231

)

(24

)

Commodity price risk on commodity inventory (4)

(16

)

15

(1

)

4

1

5

Total

$

(3,961

)

$

3,566

$

(395

)

$

(2,626

)

$

2,312

$

(314

)

Amounts Recognized in Income for the Six Months Ended June 30

2010

2009

Hedged

Hedge

Hedged

Hedge

(Dollars in millions)

Derivative

Item

Ineffectiveness

Derivative

Item

Ineffectiveness

Derivatives designated as fair value hedges

Interest rate risk on long-term debt (1)

$

4,086

$

(4,330

)

$

(244

)

$

(4,616

)

$

4,165

$

(451

)

Interest rate and foreign currency risk on long-term debt (1)

(3,282

)

2,955

(327

)

63

22

85

Interest rate risk on available-for-sale securities (2, 3)

(5,270

)

5,184

(86

)

260

(312

)

(52

)

Commodity price risk on commodity inventory (4)

42

(46

)

(4

)

60

(57

)

3

Total

$

(4,424

)

$

3,763

$

(661

)

$

(4,233

)

$

3,818

$

(415

)

(1)

Amounts are recorded in interest expense on long-term debt.

(2)

Amounts are recorded in interest income on AFS securities.

(3)

Measurement of ineffectiveness in the three and six months ended
June 30, 2010 includes $0 and $4 million compared to $13 million and $42
million for the same periods of 2009 of interest costs on short forward
contracts. The Corporation considers this as part of the cost of hedging, and
it is offset by the fixed coupon receipt on the AFS security that is recognized
in interest income on securities.

The following table summarizes certain information related to the Corporations
derivatives designated as cash flow hedges and net investment hedges for the three and six months
ended June 30, 2010 and 2009. During the next 12 months, net losses in accumulated OCI of
approximately $1.2 billion ($735 million after-tax) on derivative instruments that qualify as cash
flow hedges are expected to be reclassified into earnings. These net losses reclassified into
earnings are expected to primarily reduce net interest income related to the respective hedged
items.

Three Months Ended June 30

2010

2009

Hedge

Hedge

Ineffectiveness

Ineffectiveness

Amounts

Amounts

and Amount

Amounts

Amounts

and Amount

Recognized

Reclassified

Excluded from

Recognized

Reclassified

Excluded from

in OCI on

from OCI

Effectiveness

in OCI on

from OCI

Effectiveness

(Dollars in millions, amounts pre-tax)

Derivatives

into Income

Testing(1)

Derivatives

into Income

Testing (1)

Derivatives designated as cash flow hedges

Interest rate risk on variable rate portfolios (2, 3, 4)

$

(856

)

$

(105

)

$

(6

)

$

(193

)

$

(376

)

$

35

Commodity price risk on forecasted purchases and sales
(5)

(5

)

10

1

(54

)

2

-

Price risk on restricted stock awards (6)

(181

)

6

-

n/a

n/a

n/a

Price risk on equity investments included in available-for-sale
securities (7)

180

(226

)

-

(10

)

-

-

Total

$

(862

)

$

(315

)

$

(5

)

$

(257

)

$

(374

)

$

35

Net investment hedges

Foreign exchange risk (8)

$

906

$

-

$

(68

)

$

(3,015

)

$

-

$

(27

)

Six Months Ended June 30

2010

2009

Hedge

Hedge

Ineffectiveness

Ineffectiveness

Amounts

Amounts

and Amount

Amounts

Amounts

and Amount

Recognized

Reclassified

Excluded from

Recognized

Reclassified

Excluded from

in OCI on

from OCI

Effectiveness

in OCI on

from OCI

Effectiveness

(Dollars in millions, amounts pre-tax)

Derivatives

into Income

Testing(1)

Derivatives

into Income

Testing (1)

Derivatives designated as cash flow hedges

Interest rate risk on variable rate portfolios (2, 3, 4)

$

(1,358

)

$

(186

)

$

(20

)

$

(42

)

$

(860

)

$

38

Commodity price risk on forecasted purchases and sales
(5)

27

13

2

14

5

-

Price risk on restricted stock awards (6)

(37

)

17

-

n/a

n/a

n/a

Price risk on equity investments included in available-for-sale
securities (7)

Amounts reclassified from
accumulated OCI increased interest income on assets by $33 million and reduced interest income on assets by $64 million, and increased interest expense on liabilities by
$138 million and $312 million during the three months ended
June 30, 2010 and 2009. Amounts reclassified from accumulated OCI increased interest income on assets by $80 million and reduced interest income on
assets by $108 million, and increased interest expense on liabilities by $266 million and $752 million during the six months ended June 30, 2010 and 2009.

(3)

Hedge ineffectiveness of
$(17) million and $(19) million was recorded in interest income
during the three and six months ended June 30, 2010 compared to
$35 million and $38 million
for the same periods in 2009. Hedge ineffectiveness of
$11 million and $(1) million was recorded in interest expense
during the three and six months ended June 30, 2010 compared to $0 for the same
periods in 2009.

(4)

Amounts reclassified from
accumulated OCI exclude amounts related to derivative interest accruals which increased interest income by $69 million and $131 million for the three and six months
ended June 30, 2010 compared to $53 million and $56 million for the same periods in 2009.

(5)

Amounts reclassified from
accumulated OCI are recorded in trading account profits with the
underlying hedged item.

(6)

Amounts reclassified from
accumulated OCI are recorded in personnel expense.

(7)

Amounts reclassified from
accumulated OCI are recorded in equity investment income with the
underlying hedged item.

(8)

Amounts recognized in
accumulated OCI on derivatives exclude gains of $114 million and $376 million related to long-term debt designated as a net investment hedge for the three and six months
ended June 30, 2010 compared to losses of $472 million and $439 million for the same periods in 2009.

n/a = not applicable

The Corporation entered into total return swaps to hedge a portion of cash-settled
restricted stock units (RSUs) granted to certain employees in the three months ended March 31,
2010 as part of their 2009 compensation. These cash-settled RSUs are accrued as liabilities over
the vesting period and adjusted to fair value based on changes in the share price of the
Corporations common stock. The Corporation entered into the derivatives to minimize the change in
the expense to the Corporation driven by fluctuations in the

share price of the Corporations common stock during the vesting period of the RSUs. Certain of
these derivatives are designated as cash flow hedges of unrecognized non-vested awards with the
changes in fair value of the hedge recorded in accumulated OCI and reclassified into earnings in the same
period as the RSUs affect earnings. The remaining derivatives are accounted for as economic hedges
and changes in fair value are recorded in personnel expense. For more information on restricted
stock units and related hedges, see Note 12  Shareholders Equity and Earnings Per Common Share.

Economic Hedges

Derivatives designated as economic hedges are used by the Corporation to reduce certain
risk exposures but are not accounted for as accounting hedges. The following table presents gains
(losses) on these derivatives for the three and six months ended June 30, 2010 and 2009. These
gains (losses) are largely offset by the income or expense that is recorded on the economically
hedged item. Gains (losses) on derivatives related to price risk on mortgage banking production
income and interest rate risk on mortgage banking servicing income are recorded in mortgage
banking income. Gains (losses) on derivatives and bonds related to credit risk on loans are
recorded in other income, trading account profits and net interest income. Gains (losses) on
derivatives related to interest rate and foreign currency risk on
long-term debt and other foreign
currency exchange transactions are recorded in other income and
trading account profits. Gains (losses) on
other economic hedge transactions are recorded in other income,
trading account profits and personnel expense.

Includes gains on interest rate lock commitments related to the origination of mortgage loans that are held-for-sale, which
are considered derivative instruments, of $2.8 billion and $4.6 billion for the three and six months ended June 30, 2010 compared to $1.2
billion and $3.7 billion for the same periods in 2009.

The Corporation enters into trading derivatives to facilitate client transactions, for
principal trading purposes, and to manage risk exposures arising from trading assets and
liabilities. It is the Corporations policy to include these derivative instruments in its trading
activities which include derivatives and non-derivative cash instruments. The resulting risk from
these derivatives is managed on a portfolio basis as part of the Corporations GBAM business
segment. The related sales and trading revenue generated within
GBAM is recorded on various income
statement line items including trading account profits and net interest income as well as other
revenue categories. However, the vast majority of income related to derivative instruments is
recorded in trading account profits. The following table identifies the amounts in the income
statement line items attributable to the Corporations sales and trading revenue categorized by
primary risk for the three and six months ended June 30, 2010 and 2009.

Three Months Ended June 30

2010

2009

Trading

Net

Trading

Net

Account

Other

Interest

Account

Other

Interest

(Dollars in millions)

Profits

Revenues
(1)

Income

Total

Profits

Revenues (1)

Income

Total

Interest rate risk

$

434

$

34

$

132

$

600

$

(298

)

$

5

$

277

$

(16

)

Foreign exchange risk

234

1

1

236

260

4

6

270

Equity risk

176

748

(46

)

878

359

817

21

1,197

Credit risk

447

143

913

1,503

1,714

(388

)

1,176

2,502

Other risk

(102

)

6

(39

)

(135

)

(25

)

(35

)

(123

)

(183

)

Total sales
and trading
revenue

$

1,189

$

932

$

961

$

3,082

$

2,010

$

403

$

1,357

$

3,770

Six Months Ended June 30

2010

2009

Trading

Net

Trading

Net

Account

Other

Interest

Account

Other

Interest

(Dollars in millions)

Profits

Revenues
(1)

Income

Total

Profits

Revenues (1)

Income

Total

Interest rate risk

$

1,491

$

75

$

315

$

1,881

$

2,666

$

20

$

610

$

3,296

Foreign exchange risk

515

2

1

518

534

5

13

552

Equity risk

1,051

1,358

-

2,409

1,145

1,440

102

2,687

Credit risk

3,067

272

1,907

5,246

1,911

(1,492

)

3,080

3,499

Other risk

120

14

(89

)

45

657

(75

)

(312

)

270

Total sales
and trading
revenue

$

6,244

$

1,721

$

2,134

$

10,099

$

6,913

$

(102

)

$

3,493

$

10,304

(1)

Represents investment and brokerage services and other income recorded in GBAM that the Corporation includes in its definition of sales and
trading revenue.

Credit Derivatives

The Corporation enters into credit derivatives primarily to facilitate client
transactions and to manage credit risk exposures. Credit derivatives derive value based on an
underlying third party-referenced obligation or a portfolio of referenced obligations and
generally require the Corporation as the seller of credit protection to make payments to a buyer
upon the occurrence of a predefined credit event. Such credit events generally include bankruptcy
of the referenced credit entity and failure to pay under the obligation, as well as acceleration
of indebtedness and payment repudiation or moratorium. For credit derivatives based on a portfolio
of referenced credits or credit indices, the Corporation may not be required to make payment until
a specified amount of loss has occurred and/or may only be required to make payment up to a
specified amount.

Credit derivative instruments in which the Corporation is the seller of credit protection and
their expiration at June 30, 2010 and December 31, 2009 are summarized below. These instruments
are classified as investment and non-investment grade based on the credit quality of the
underlying reference obligation. The Corporation considers ratings of BBB- or higher as investment
grade. Non-investment grade includes non-rated credit derivative instruments.

June 30, 2010

Carrying Value

Less than

One to

Three to

Over

(Dollars in millions)

One Year

Three Years

Five Years

Five Years

Total

Credit default swaps:

Investment grade

$

842

$

12,003

$

17,464

$

26,681

$

56,990

Non-investment grade

972

10,058

12,089

24,482

47,601

Total

1,814

22,061

29,553

51,163

104,591

Total return swaps/other:

Investment grade

-

-

56

28

84

Non-investment grade

1

2

37

316

356

Total

1

2

93

344

440

Total credit derivatives

$

1,815

$

22,063

$

29,646

$

51,507

$

105,031

Maximum Payout/Notional

Credit default swaps:

Investment grade

$

176,308

$

505,328

$

591,170

$

330,692

$

1,603,498

Non-investment grade

87,853

284,748

246,762

198,453

817,816

Total

264,161

790,076

837,932

529,145

2,421,314

Total return swaps/other:

Investment grade

-

22

8,902

981

9,905

Non-investment grade

579

168

2,378

10,293

13,418

Total

579

190

11,280

11,274

23,323

Total credit derivatives

$

264,740

$

790,266

$

849,212

$

540,419

$

2,444,637

December 31, 2009

Carrying Value

Less than

One to

Three to

Over

(Dollars in millions)

One Year

Three Years

Five Years

Five Years

Total

Credit default swaps:

Investment grade

$

454

$

5,795

$

5,831

$

24,586

$

36,666

Non-investment grade

1,342

14,012

16,081

30,274

61,709

Total

1,796

19,807

21,912

54,860

98,375

Total return swaps/other:

Investment grade

1

20

5

540

566

Non-investment grade

-

194

3

291

488

Total

1

214

8

831

1,054

Total credit derivatives

$

1,797

$

20,021

$

21,920

$

55,691

$

99,429

Maximum Payout/Notional

Credit default swaps:

Investment grade

$

147,501

$

411,258

$

596,103

$

335,526

$

1,490,388

Non-investment grade

123,907

417,834

399,896

356,735

1,298,372

Total

271,408

829,092

995,999

692,261

2,788,760

Total return swaps/other:

Investment grade

31

60

1,081

8,087

9,259

Non-investment grade

2,035

1,280

2,183

18,352

23,850

Total

2,066

1,340

3,264

26,439

33,109

Total credit derivatives

$

273,474

$

830,432

$

999,263

$

718,700

$

2,821,869

The notional amount represents the maximum amount payable by the Corporation for most
credit derivatives. However, the Corporation does not solely monitor its exposure to credit
derivatives based on notional amount because this measure does not take into consideration the
probability of occurrence. As such, the notional amount is not a reliable indicator of the
Corporations exposure to these contracts. Instead, a risk framework is used to define risk
tolerances and establish limits to help ensure that certain credit risk-related losses occur
within acceptable, predefined limits.

The Corporation economically hedges its market risk exposure to credit derivatives by
entering into a variety of offsetting derivative contracts and security positions. For example, in
certain instances, the Corporation may purchase

credit protection with identical underlying
referenced names to offset its exposure. The carrying value and notional amount of written credit
derivatives for which the Corporation held purchased credit derivatives with identical underlying
referenced names and terms at June 30, 2010 was $72.1 billion and $1.7 trillion compared to $79.4
billion and $2.3 trillion at December 31, 2009.

Credit Risk Management of Derivatives and Credit-related Contingent Features

The Corporation executes the majority of its derivative contracts in the
over-the-counter market with large, international financial institutions, including broker/dealers
and, to a lesser degree, with a variety of non-financial companies. Substantially all of the
derivative transactions are executed on a daily margin basis. Therefore, events such as a credit
ratings downgrade (depending on the ultimate rating level) or a breach of credit covenants would
typically require an increase in the amount of collateral required of the counterparty, where
applicable, and/or allow the Corporation to take additional protective measures such as early
termination of all trades. Further, as previously described on page 14, the Corporation enters
into legally enforceable master netting agreements which reduce risk by permitting the closeout
and netting of transactions with the same counterparty upon the occurrence of certain events.

Substantially all of the Corporations derivative contracts contain credit risk-related
contingent features, primarily in the form of International Swaps and Derivatives Association,
Inc. (ISDA) master agreements that enhance the creditworthiness of these instruments as compared
to other obligations of the respective counterparty with whom the Corporation has transacted
(e.g., other debt or equity). These contingent features may be for the benefit of the Corporation,
as well as its counterparties with respect to changes in the Corporations creditworthiness. At
June 30, 2010 and December 31, 2009, the Corporation received cash and securities collateral of
$81.9 billion and $74.6 billion, and posted cash and securities collateral of $74.5 billion and
$69.1 billion in the normal course of business under derivative agreements.

In connection with certain over-the-counter derivative contracts and other trading
agreements, the Corporation could be required to provide additional collateral or to terminate
transactions with certain counterparties in the event of a downgrade of the senior debt ratings of
Bank of America Corporation and its subsidiaries. The amount of additional collateral required
depends on the contract and is usually a fixed incremental amount and/or the market value of the
exposure. At June 30, 2010 and December 31, 2009, the amount of additional collateral and
termination payments that would have been required for such derivatives and trading agreements was
approximately $1.0 billion and $2.1 billion if the long-term credit rating of Bank of America
Corporation and its subsidiaries was incrementally downgraded by one level by all ratings
agencies. At June 30, 2010 and December 31, 2009, a second incremental one level downgrade by the
ratings agencies would have required approximately $1.0 billion and $1.2 billion in additional
collateral.

The Corporation records counterparty credit risk valuation adjustments on derivative assets
in order to properly reflect the credit quality of the counterparty. These adjustments are
necessary as the market quotes on derivatives do not fully reflect the credit risk of the
counterparties to the derivative assets. The Corporation considers collateral and legally
enforceable master netting agreements that mitigate its credit exposure to each counterparty in
determining the counterparty credit risk valuation adjustment. All or a portion of these
counterparty credit risk valuation adjustments can be reversed or otherwise adjusted in future
periods due to changes in the value of the derivative contract, collateral and creditworthiness of
the counterparty. During the three and six months ended June 30, 2010, credit valuation losses of
$758 million and $421 million ($308 million and $366 million, net of hedges) compared to gains of
$1.4 billion and $1.5 billion ($634 million and $593 million, net of hedges) for the same periods
in 2009 for counterparty credit risk related to derivative assets were recognized in trading
account profits. At June 30, 2010 and December 31, 2009, the cumulative counterparty credit risk
valuation adjustment reduced the derivative assets balance by $8.0 billion and $7.8 billion.

In addition, the fair value of the Corporations or its subsidiaries derivative liabilities
is adjusted to reflect the impact of the Corporations credit quality. During the three and six
months ended June 30, 2010, credit valuation gains (losses) of $206 million and $368 million ($85
million and $251 million, net of hedges) compared to $(1.6) billion and $85 million for the same
periods in 2009 were recognized in trading account profits for changes in the Corporations or its
subsidiaries credit risk. At June 30, 2010 and December 31, 2009, the Corporations cumulative
credit risk valuation adjustment reduced the derivative liabilities balance by $1.2 billion and
$664 million.

The following table presents the amortized cost, gross unrealized gains and losses in
accumulated OCI, and fair value of AFS debt and marketable equity securities at June 30, 2010 and
December 31, 2009.

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

(Dollars in millions)

Cost

Gains

Losses

Value

Available-for-sale debt securities, June 30, 2010

U.S. Treasury and agency securities

$

50,630

$

476

$

(722

)

$

50,384

Mortgage-backed securities:

Agency

148,618

5,025

(62

)

153,581

Agency collateralized mortgage obligations

40,139

816

(85

)

40,870

Non-agency residential (1)

29,795

597

(1,032

)

29,360

Non-agency commercial

6,327

840

(39

)

7,128

Foreign securities

3,703

70

(823

)

2,950

Corporate bonds

6,249

181

(63

)

6,367

Other taxable securities (2)

17,176

73

(537

)

16,712

Total taxable securities

302,637

8,078

(3,363

)

307,352

Tax-exempt securities

7,462

96

(145

)

7,413

Total available-for-sale debt securities

$

310,099

$

8,174

$

(3,508

)

$

314,765

Available-for-sale marketable equity securities (3)

$

181

$

30

$

(32

)

$

179

Available-for-sale debt securities, December 31, 2009

U.S. Treasury and agency securities

$

22,648

$

414

$

(37

)

$

23,025

Mortgage-backed securities:

Agency

164,677

2,415

(846

)

166,246

Agency collateralized mortgage obligations

25,330

464

(13

)

25,781

Non-agency residential (1)

37,940

1,191

(4,028

)

35,103

Non-agency commercial

6,354

671

(116

)

6,909

Foreign securities

4,732

61

(896

)

3,897

Corporate bonds

6,136

182

(126

)

6,192

Other taxable securities (2)

25,469

260

(478

)

25,251

Total taxable securities

293,286

5,658

(6,540

)

292,404

Tax-exempt securities

9,340

100

(243

)

9,197

Total available-for-sale debt securities

$

302,626

$

5,758

$

(6,783

)

$

301,601

Available-for-sale marketable equity securities (3)

$

6,020

$

3,895

$

(507

)

$

9,408

(1)

At June 30, 2010, includes approximately 88 percent prime bonds, 10 percent Alt-A bonds, and two percent subprime bonds. At December 31,
2009, includes approximately 85 percent of prime bonds, 10 percent of Alt-A bonds, and five percent of subprime bonds.

(2)

Substantially all asset-backed securities (ABS).

(3)

Classified in other assets on the Corporations Consolidated Balance Sheet.

At June 30, 2010, the accumulated net unrealized gains on AFS debt securities included
in accumulated OCI were $2.9 billion, net of the related income tax expense of $1.8 billion. At
June 30, 2010 and December 31, 2009, the Corporation had nonperforming AFS debt securities of $197
million and $467 million.

At June 30, 2010, both the amortized cost and fair value of held-to-maturity (HTM) debt
securities were $435 million. At December 31, 2009, the amortized cost and fair value of HTM debt
securities were $9.8 billion and $9.7 billion, which included ABS that were issued by the
Corporations credit card securitization trust and retained by the Corporation with an amortized
cost of $6.6 billion and a fair value of $6.4 billion. As a result of the adoption of new
consolidation guidance, the Corporation consolidated the credit card securitization trusts on
January 1, 2010 and the ABS were eliminated in consolidation and the related consumer credit card
loans were included in loans and leases on the Corporations Consolidated Balance Sheet.
Additionally, $2.9 billion of debt securities held in consolidated commercial paper conduits were
reclassified from HTM to AFS as a result of new regulatory capital requirements related to
asset-backed commercial paper conduits.

For initial other-than-temporary impairments, represents the excess of the amortized cost over the fair value of AFS debt securities. For subsequent impairments of the same security, represents
additional declines in fair value subsequent to the previously recorded other-than-temporary impairment(s), if applicable.

(2)

Represents the non-credit component of OTTI losses on AFS debt securities. For the three and six months ended June 30, 2010, for certain securities, the Corporation recognized credit losses in excess of
unrealized losses in accumulated OCI. In these instances, a portion
of the credit losses recognized in earnings has been offset by an unrealized gain. Balances above exclude $16 million and $49 million of gross gains recorded in accumulated
OCI related to these securities for the three and six months ended June 30, 2010 and $281 million for the same periods in 2009.

The following table presents activity for the three and six months ended June 30, 2010
and 2009 related to the credit component recognized in earnings on debt securities held by the
Corporation for which a portion of the OTTI loss remains in
accumulated OCI.

Three Months Ended

Six Months Ended

June 30

June 30

(Dollars in millions)

2010

2009

2010

2009

Balance, beginning of period

$

875

$

40

$

442

$

-

Credit component of
other-than-temporary impairment
not reclassified to OCI in
connection with the cumulative
effect transition adjustment
(1)

-

-

-

22

Additions for the credit
component on debt securities on
which other-than-temporary
impairment losses were not
previously recognized
(2)

46

256

177

274

Additions for the credit
component on debt securities on
which other-than-temporary
impairment losses were
previously recognized

19

-

321

-

Balance, June 30

$

940

$

296

$

940

$

296

(1)

At January 1, 2009, the Corporation had securities with $134 million of
OTTI previously recognized in earnings of which $22 million represented the credit component
and $112 million represented the non-credit component which was
reclassified to accumulated OCI through a
cumulative effect transition adjustment.

(2)

During the three and six months ended June 30, 2010 and 2009, the Corporation
recognized $61 million and $229 million, and $770 million and $1.1 billion of OTTI losses on
debt securities on which no portion of OTTI loss remained in
accumulated OCI. OTTI losses related to these
securities are excluded from these amounts.

As of June 30, 2010, those debt securities with OTTI for which a portion of the OTTI
loss remains in accumulated OCI primarily consisted of non-agency residential mortgage-backed securities
(RMBS) and CDOs. The Corporation estimates the portion of loss attributable to credit using a
discounted cash flow model. The Corporation estimates the expected cash flows of the underlying
collateral using internal credit risk, interest rate risk and prepayment risk models that
incorporate managements best estimate of current key assumptions such as default rates, loss
severity and prepayment rates. Assumptions used can vary widely from loan to loan and are
influenced by such factors as loan interest rate, geographical location of the borrower, borrower
characteristics and collateral type. The Corporation then uses a third party vendor to determine
how the underlying collateral cash flows will be distributed to each security issued from the
structure. Expected principal and interest cash flows on an impaired debt security are discounted
using the book yield of each individual impaired debt security.

Based on the expected cash flows derived from the model, the Corporation expects to recover
the unrealized losses in accumulated OCI on non-agency RMBS. Significant assumptions used in the
valuation of non-agency RMBS are in the table below. Annual constant prepayment speed and loss
severity rates are projected considering collateral characteristics such as loan-to-value (LTV),
creditworthiness of borrowers (FICO) and geographic concentrations. The weighted-average severity
by collateral type was 36 percent for prime bonds, 44 percent for Alt-A bonds and 48 percent for
subprime bonds. Additionally, default rates are projected by considering collateral
characteristics including, but not limited to LTV, FICO and geographic concentration.
Weighted-average life default rates by collateral type were 37 percent for prime bonds, 59 percent
for Alt-A bonds and 69 percent for subprime bonds.

Range(1)

Weighted-

10th

90th

average

Percentile(2)

Percentile(2)

Prepayment speed

11.8

%

3.0

%

26.3

%

Loss severity

42.4

16.6

51.8

Life default rate

49.9

2.5

98.9

(1)

Represents the range of inputs/assumptions based upon the underlying collateral.

(2)

The value of a variable below which the indicated percentile of observations will fall.

Additionally, based on the expected cash flows derived from the model, the Corporation
expects to recover the unrealized losses in accumulated OCI on CDOs. Certain assumptions used in
the valuation of CDOs were an annual constant prepayment speed, loss severities and default rates
which take into consideration various collateral characteristics including but not limited to
asset type, subordination and vintages. For CDOs, these assumptions were a maximum prepayment
speed of 26 percent, a maximum default rate of 58 percent and a maximum loss severity of 100
percent. Due to the structure and variability of the underlying collateral for the CDOs, the
minimum end of the ranges and a weighted-average for each of these assumptions are not meaningful.

The following table presents the current fair value and the associated gross unrealized
losses on investments in securities with gross unrealized losses at June 30, 2010 and December 31,
2009, and whether these securities have had gross unrealized losses for less than twelve months,
or for twelve months or longer.

At June 30, 2010, the amortized cost of approximately 8,000 AFS securities exceeded
their fair value by $3.5 billion. The gross unrealized losses include $1.0 billion on non-agency
RMBS, and $1.4 billion on foreign securities and other taxable securities, which are primarily
CDOs. Combined, these securities represent 68 percent of the $3.5 billion in gross unrealized
losses. Of the $3.5 billion, $1.4 billion of gross unrealized losses have existed for less than
twelve months and $2.2 billion of gross unrealized losses have existed for a period of twelve
months or longer. Of the gross unrealized losses existing for twelve months or longer, $862
million related to approximately 200 non-agency RMBS and $1.1 billion related to foreign
securities and other taxable securities. Combined, these securities represented 93 percent of the
gross unrealized losses that have existed for a period of twelve months or longer. Gross
unrealized losses are principally the result of ongoing illiquidity in the markets and the
interest rate environment.

The Corporation considers the length of time and extent to which the fair value of AFS debt
securities have been less than cost to conclude that such securities were not
other-than-temporarily impaired. The Corporation also considers other factors such as the
financial condition of the issuer including credit ratings and specific events affecting the
operations of the issuer, volatility of the security, underlying assets that collateralize the
debt security, and other industry and macroeconomic conditions. As the Corporation has no intent
to sell securities with unrealized losses and it is not more-likely-than-not that the Corporation
will be required to sell these securities before recovery of amortized cost, the Corporation has
concluded that the securities are not impaired on an other-than-temporary basis.

The amortized cost and fair value of the Corporations investment in AFS debt securities from
the Federal National Mortgage Association (FNMA), Government National Mortgage Association (GNMA)
and the Federal Home Loan Mortgage Corporation (FHLMC) where the investment exceeded 10 percent of
consolidated shareholders equity at June 30, 2010 and December 31, 2009 are presented in the
following table.

June 30, 2010

December 31, 2009

Amortized

Fair

Amortized

Fair

(Dollars in millions)

Cost

Value

Cost

Value

Federal National Mortgage Association

$

90,748

$

93,318

$

100,321

$

101,096

Government National Mortgage Association

69,588

71,517

60,610

61,121

Federal Home Loan Mortgage Corporation

28,421

29,616

29,076

29,810

Securities are pledged or assigned to secure borrowed funds, government and trust
deposits, and for other purposes. The carrying value of pledged securities was $138.1 billion and
$122.7 billion at June 30, 2010 and December 31, 2009.

The expected maturity distribution of the Corporations MBS and the contractual maturity
distribution of the Corporations other AFS debt securities, and the yields on the Corporations
AFS debt securities portfolio at June 30, 2010 are summarized in the following table. Actual
maturities may differ from the contractual or expected maturities since borrowers may have the
right to prepay obligations with or without prepayment penalties.

June 30, 2010

Due after One

Due after Five

Due in One

Year through

Years through

Due after

Year or Less

Five Years

Ten Years

Ten Years

Total

(Dollars in millions)

Amount

Yield(1)

Amount

Yield(1)

Amount

Yield(1)

Amount

Yield(1)

Amount

Yield(1)

Fair value of available-for-sale debt
securities

U.S. Treasury and agency securities

$

269

2.18

%

$

1,881

2.55

%

$

12,725

3.21

%

$

35,509

3.82

%

$

50,384

3.60

%

Mortgage-backed securities:

Agency

41

4.96

102,504

4.53

11,760

4.68

39,276

4.36

153,581

4.50

Agency collateralized mortgage
obligations

425

3.20

15,363

2.85

14,620

4.12

10,462

2.38

40,870

3.19

Non-agency residential

327

9.54

5,569

7.01

2,612

5.65

20,852

4.39

29,360

5.05

Non-agency commercial

211

5.41

4,916

5.97

1,642

11.71

359

6.07

7,128

7.28

Foreign securities

351

1.38

2,390

5.99

171

4.02

38

1.17

2,950

5.15

Corporate bonds

280

3.60

4,242

3.11

1,573

4.54

272

4.37

6,367

3.54

Other taxable securities

4,653

1.40

4,224

1.30

389

4.01

7,446

3.83

16,712

2.51

Total taxable securities

6,557

2.20

141,089

4.36

45,492

4.38

114,214

3.99

307,352

4.17

Tax-exempt securities

156

3.73

1,698

4.19

2,946

4.16

2,613

3.02

7,413

3.76

Total available-for-sale debt
securities

$

6,713

2.23

$

142,787

4.36

$

48,438

4.37

$

116,827

3.96

$

314,765

4.16

Amortized cost of available-for-sale
debt securities

$

6,968

$

139,833

$

46,892

$

116,406

$

310,099

(1)

Yields are calculated based on the amortized cost of the securities.

The components of realized gains and losses on sales of debt securities for the three
and six months ended June 30, 2010 and 2009 are presented in the table below. During the second
quarter of 2010, the Corporation entered into a series of transactions in its AFS debt securities
portfolio that involved securitizations as well as sales of non-agency RMBS. The Corporation made
the decision to enter into these transactions in late May 2010 following a review of corporate
risk objectives in light of proposed Basel regulatory capital changes and liquidity targets. The
carrying value of the non-agency RMBS portfolio was reduced $5.2
billion during the quarter primarily as a result of the aforementioned sales and securitizations
as well as paydowns. The Corporation recognized net losses of $711 million on the sales and
securitizations, and improved the overall credit quality of the remaining portfolio such that the
percentage of the non-agency RMBS portfolio that is below investment grade was reduced
significantly.

Three Months Ended June 30

Six Months Ended June 30

(Dollars in millions)

2010

2009

2010

2009

Gross gains

$

942

$

744

$

1,848

$

2,281

Gross losses

(905

)

(112

)

(1,077

)

(151

)

Net gains on sales of debt securities

$

37

$

632

$

771

$

2,130

The income tax expense attributable to realized net gains on sales on debt securities
was $14 million and $285 million for the three and six months ended June 30, 2010 compared to $234
million and $788 million for the same periods in 2009.

Certain Corporate and Strategic Investments

At both June 30, 2010 and December 31, 2009, the Corporation owned approximately 11
percent, or 25.6 billion common shares of China Construction Bank (CCB). During the six months
ended June 30, 2009, the Corporation sold its initial investment of 19.1 billion common shares in
CCB for a pre-tax gain of $7.3 billion. The remaining investment of 25.6 billion common shares is
accounted for at cost and classified in other assets. Dividends related
to this investment are accrued when declared. Of the
total investment, 23.6 billion shares are non-transferable until August 2011. Under applicable
accounting guidance, beginning one year prior to the date when the shares become transferrable,
the shares will be accounted for as AFS securities and carried at fair value with unrealized gains
and losses included in accumulated OCI. At June 30, 2010 and

December 31, 2009, both the cost and the carrying value of the CCB investment were $9.2 billion,
and the fair value was $20.8 billion and $22.0 billion. Dividend income on this
investment is recorded in equity investment income and during the
second quarter of 2010, the
Corporation accrued a dividend of $535 million from CCB. The Corporation remains a
significant shareholder in CCB and intends to continue the important long-term strategic alliance
with CCB originally entered into in 2005. As part of this alliance, the Corporation expects to
continue to provide advice and assistance to CCB.

In June 2010, the Corporation sold its investment of 188.4 million preferred shares and 56.5
million common shares in Itaú Unibanco Holding S.A. (Itaú
Unibanco) for $3.9 billion.
The Itaú Unibanco investment was accounted for at fair value and
classified as AFS marketable equity
securities in other assets with unrealized gains recorded, net-of-tax, in accumulated OCI. The
carrying value of this investment was $2.6 billion and, after transaction costs, the pre-tax gain
was $1.2 billion.

In June 2010, the Corporation entered into a definitive agreement to sell its 24.9 percent
ownership interest in Grupo Financiero Santander, S.A.B. de C.V. to an affiliate of its parent
company, Banco Santander, S.A., the majority interest holder. The sale price is $2.5 billion and
the Corporations carrying value at the agreement date was $2.9 billion which included the impact of
foreign currency translation adjustments in accumulated OCI. This investment is classified in other assets and
is accounted for under the equity method of accounting. Because the sale is expected to result in
a loss, the Corporation recorded an impairment write-down in the three months ended June 30, 2010
equal to the estimated pre-tax loss of $428 million. The sale is expected to close during the
three months ended September 30, 2010.

In
June 2010, the Corporation sold all of its MasterCard equity
position, which was
acquired primarily upon MasterCards IPO. In connection with the transaction, the Corporation
recorded a pre-tax gain of $440 million.

In
the second quarter of 2010, the Corporation entered into agreements to sell $2.9 billion of its exposure in
certain private equity funds including $1.5 billion of funded exposure and $1.4 billion of
unfunded commitments. The pre-tax loss recognized in the three months ended June 30, 2010 on these
transactions was $163 million.

At both June 30, 2010 and December 31, 2009, the Corporation had an economic ownership of
approximately 34 percent in BlackRock, Inc. (BlackRock), a publicly traded investment company. The
carrying value of this investment at June 30, 2010 and December 31, 2009 was $10.1 billion and
$10.0 billion and the fair value was $9.3 billion and $15.0 billion, respectively. This investment
is classified in other assets and is accounted for under the equity method of accounting with income
recorded as equity investment income.

On June 26, 2009, the Corporation entered into a joint venture agreement with First Data
Corporation (First Data) creating Banc of America Merchant Services, LLC. Under the terms of the
agreement, the Corporation contributed its merchant processing business to the joint venture and
First Data contributed certain merchant processing contracts and personnel resources. During the
three months ended June 30, 2009, the Corporation recorded in other income a pre-tax gain of $3.8
billion related to this transaction. In addition to the Corporation and First Data,
the remaining stake was initially held by a third party. During the
second quarter of 2010, the third party sold its
interest to the joint venture, resulting in an ownership increase in this joint venture to
approximately 49 percent for the Corporation and 51 percent for First Data. The
investment in the joint venture, which was initially recorded at a fair value of $4.7 billion, is
accounted for under the equity method of accounting with income recorded as equity investment
income. The carrying value of the investment at both June 30, 2010 and December 31, 2009 was $4.7 billion.

The table below presents outstanding loans and leases at June 30, 2010 and December 31,
2009.

June 30

December 31

(Dollars in millions)

2010(1)

2009

Consumer

Residential mortgage (2)

$

245,502

$

242,129

Home equity

146,274

149,126

Discontinued real estate (3)

13,780

14,854

Credit card  domestic

116,739

49,453

Credit card  foreign

26,391

21,656

Direct/Indirect consumer (4)

98,239

97,236

Other consumer (5)

3,008

3,110

Total consumer

649,933

577,564

Commercial

Commercial  domestic (6)

191,458

198,903

Commercial real estate (7)

61,587

69,447

Commercial lease financing

21,392

22,199

Commercial  foreign

27,909

27,079

Total commercial loans

302,346

317,628

Commercial loans measured at fair value (8)

3,898

4,936

Total commercial

306,244

322,564

Total loans and leases

$

956,177

$

900,128

(1)

Periods subsequent to January 1, 2010 are presented in accordance with new consolidation guidance.

(2)

Includes foreign residential mortgages of $500 million and $552 million at June 30, 2010 and December 31, 2009.

(3)

Includes $12.4 billion and $13.4 billion of pay option loans, and $1.4 billion and $1.5 billion of subprime loans at June 30, 2010 and
December 31, 2009. The Corporation no longer originates these products.

Includes consumer finance loans of $2.1 billion and $2.3 billion, other foreign consumer loans of $733 million and $709 million and
consumer overdrafts of $186 million and $144 million at June 30, 2010 and December 31, 2009.

(6)

Includes small business commercial  domestic loans, including card related products, of $15.9 billion and $17.5 billion at June 30, 2010
and December 31, 2009.

(7)

Includes domestic commercial real estate loans of $59.1 billion and $66.5 billion and foreign commercial real estate loans of $2.4 billion
and $3.0 billion at June 30, 2010 and December 31, 2009.

(8)

Certain commercial loans are accounted for under the fair value option and include commercial  domestic loans of $2.1 billion and $3.0
billion, commercial  foreign loans of $1.7 billion and $1.9 billion and commercial real estate loans of $114 million and $90 million at June 30, 2010
and December 31, 2009. See Note 14  Fair Value Measurements for additional information on the fair value option.

The Corporation mitigates a portion of its credit risk on the residential mortgage
portfolio through the use of synthetic securitizations which are cash collateralized and provide
mezzanine risk protection of $2.2 billion and $2.5 billion at June 30, 2010 and December 31, 2009,
which will reimburse the Corporation in the event that losses exceed 10 basis points (bps) of the
original pool balance. The Corporation does not have a variable interest in the vehicles, which
are variable interest entities, and therefore they are not consolidated by the Corporation.
As of June 30, 2010 and December 31, 2009, $61.7 billion and $70.7 billion
of residential mortgage loans were referenced under these agreements. The decrease in these pools
was due to $6.9 billion in principal payments and $2.1 billion of loan sales. At June 30, 2010 and
December 31, 2009, the Corporation had a receivable of $944 million and $1.0 billion from these
synthetic securitizations for reimbursement of losses.
These receivables are fully collectible as there are no claims on the cash collateral that are senior to the Corporations.
In addition, the Corporation has entered
into credit protection agreements with FNMA and FHLMC totaling $7.4 billion and $6.6 billion as of
June 30, 2010 and December 31, 2009, providing full protection on conforming residential mortgage
loans that become severely delinquent.

The following table presents the Corporations nonperforming loans and leases, including
nonperforming TDRs, at June 30, 2010 and December 31, 2009. This table excludes performing TDRs
and loans accounted for under the fair value option. Nonperforming loans held-for-sale (LHFS) are
excluded from nonperforming loans and leases as they are recorded at the lower of cost or fair
value. In addition, purchased credit-impaired loans, consumer credit card, business card loans and
in general, consumer loans not secured by real estate, including renegotiated loans, are not
considered nonperforming and are therefore excluded from nonperforming loans and leases in the
table. Real estate-secured, past due consumer loans that are insured by the Federal Housing
Administration (FHA), including repurchased loans pursuant to the Corporations servicing
agreements with GNMA, are not reported as nonperforming as principal repayments are insured by the
FHA.

June 30

December 31

(Dollars in millions)

2010

2009

Consumer

Residential mortgage

$

18,283

$

16,596

Home equity

2,951

3,804

Discontinued real estate

293

249

Direct/Indirect consumer

85

86

Other consumer

72

104

Total consumer

21,684

20,839

Commercial

Commercial  domestic (1)

4,542

5,125

Commercial real estate

6,704

7,286

Commercial lease financing

140

115

Commercial  foreign

130

177

Total commercial

11,516

12,703

Total nonperforming loans and leases (2)

$

33,200

$

33,542

(1)

Includes small business commercial  domestic loans of $222 million and $200 million at June 30, 2010 and December 31, 2009.

(2)

Balances exclude nonaccruing
TDRs in the consumer real estate portfolio of $403 million and
$395 million at June 30, 2010 and December 31, 2009 that were removed from the purchased credit-impaired loan portfolio prior
to the adoption of new accounting guidance effective January 1, 2010.

Included in certain loan categories in the nonperforming table above are TDRs that were
classified as nonperforming. At June 30, 2010 and December 31, 2009, the Corporation had $3.5
billion and $2.9 billion of residential mortgages, $856 million and $1.7 billion of home equity,
$669 million and $486 million of commercial loans and $79 million and $43 million of
discontinued real estate loans that were TDRs and classified as nonperforming. In addition to
these amounts, at June 30, 2010 and December 31, 2009, the Corporation had performing TDRs that
were on accrual status of $4.1 billion and $2.3 billion of residential mortgages, $1.0 billion and
$639 million of home equity, $207 million and
$91 million of commercial loans and $32
million and $35 million of discontinued real estate.

Impaired Loans and Troubled Debt Restructurings

A loan is considered impaired when, based on current information and events, it is
probable that the Corporation will be unable to collect all amounts due from the borrower in
accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial
loans, performing commercial TDRs and both performing and nonperforming consumer real estate TDRs.
As defined in applicable accounting guidance, impaired loans exclude smaller balance homogeneous
loans that are collectively evaluated for impairment, all commercial leases and those commercial
loans accounted for under the fair value option. Purchased credit-impaired loans are reported
separately and discussed beginning on page 32.

The Corporation seeks to assist customers that are experiencing financial difficulty by
renegotiating credit card, consumer lending and small business loans (the renegotiated portfolio)
while ensuring compliance with Federal Financial Institutions Examination Council (FFIEC)
guidelines. The renegotiated portfolio may include modifications, both short- and long-term, of
interest rates or payment amounts or a combination thereof. The Corporation makes loan
modifications primarily utilizing internal renegotiation programs via direct customer contact that
manage customers debt exposures held only by the Corporation. Additionally, the Corporation
makes loan modifications with consumers who have elected to work with external renegotiation
agencies and these modifications provide solutions to customers entire unsecured debt
structures. Under both internal and external programs, customers receive reduced annual
percentage rates with fixed payments that

amortize loan balances over a 60-month period. Under both programs, a customers
charging privileges are revoked.

The following table provides detailed information on the Corporations primary modification
programs for the renegotiated portfolio.

Renegotiated Portfolio

Percent of Balances

Current or Less Than 30

Internal Programs

External Programs

Other

Total

Days Past Due

June 30

December 31

June 30

December 31

June 30

December 31

June 30

December 31

June 30

December 31

(Dollars in millions)

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

Consumer

Credit card  domestic

$

8,043

$

3,159

$

2,068

$

758

$

465

$

283

$

10,576

$

4,200

77.76

%

75.43

%

Credit card  foreign

311

252

199

168

82

435

592

855

81.43

53.02

Direct/Indirect consumer

1,414

1,414

550

539

84

89

2,048

2,042

79.04

75.44

Other consumer

3

54

4

69

1

17

8

140

78.09

68.94

Total consumer

9,771

4,879

2,821

1,534

632

824

13,224

7,237

78.13

72.66

Commercial

Small business commercial 
domestic

774

776

62

57

6

11

842

844

64.63

64.90

Total commercial

774

776

62

57

6

11

842

844

64.63

64.90

Total renegotiated loans

$

10,545

$

5,655

$

2,883

$

1,591

$

638

$

835

$

14,066

$

8,081

77.32

%

72.96

%

At June 30, 2010 and December 31, 2009, the Corporation had a renegotiated portfolio of
$14.1 billion and $8.1 billion of which $10.9 billion was current or less than 30 days past due
under the modified terms at June 30, 2010. The related allowance was $7.0 billion at June 30,
2010. Current period amounts include the impact of new consolidation guidance which resulted in
the consolidation of credit card and other securitization trusts. The average recorded investment in
the renegotiated portfolio for the six months ended June 30, 2010 and 2009 was $15.3 billion and
$5.5 billion. Interest income is accrued on outstanding balances with cash receipts first applied
to interest and fees, then to reduce outstanding principal balances. For the three and six months
ended June 30, 2010, interest income on the renegotiated portfolio totaled $205 million and $412
million compared to $72 million and $131 million for the same periods in 2009. The renegotiated
portfolio is excluded from nonperforming loans as the Corporation generally does not classify
consumer loans not secured by real estate as nonperforming as these loans are generally charged
off no later than the end of the month in which the loan becomes 180 days past due.

At June 30, 2010 and December 31, 2009, the Corporation had $11.6 billion and $12.7 billion
of impaired commercial loans and $9.6 billion and $7.7 billion of impaired consumer real estate
loans. The average recorded investment in impaired commercial and consumer real estate loans for the
six months ended June 30, 2010 and 2009 was $21.2 billion and $11.5 billion. At June 30, 2010 and
December 31, 2009, the recorded investment in impaired loans requiring an allowance for loan and
lease losses was $19.0 billion and $18.6 billion, and the related allowance for loan and lease
losses was $2.7 billion and $3.0 billion. For the three and six months ended June 30, 2010,
interest income on these impaired loans totaled $123 million and $234 million. This compared to
$60 million and $75 million for the same periods in the prior year. At June 30, 2010 and December
31, 2009, remaining commitments to lend additional funds to debtors whose terms have been modified
in a commercial or consumer TDR were immaterial.

Purchased Credit-impaired Loans

Purchased credit-impaired loans are acquired loans with evidence of credit quality
deterioration since origination for which it is probable at purchase date that the Corporation
will be unable to collect all contractually required payments. In connection with the Countrywide
acquisition in 2008, the Corporation acquired purchased credit-impaired loans, substantially all
of which are residential mortgage, home equity and discontinued real estate loans, with a
remaining unpaid principal balance at June 30, 2010, March 31, 2010 and December 31, 2009 of $44.9 billion, $46.3 billion and
$47.7 billion and a carrying amount, excluding the valuation reserve, of $36.2 billion, $37.0 billion and $37.5
billion. In connection with the Merrill Lynch acquisition in 2009, the Corporation acquired
purchased credit-impaired loans, substantially all of which are commercial and residential
mortgage loans. At June 30, 2010, the unpaid principal balance of Merrill Lynch purchased
credit-impaired consumer and commercial loans was $2.1 billion and $1.6 billion and the carrying
amount of these loans, excluding the valuation reserve, was $1.9 billion and $439 million.
At March 31, 2010, the unpaid principal balance of Merrill Lynch purchased credit-impaired
consumer and commercial loans was $2.3 billion and $1.7 billion and the carrying amount of these
loans, excluding the valuation reserve, was $2.0 billion and $604 million.
At December 31, 2009, the unpaid principal balance of Merrill Lynch purchased
credit-impaired consumer and commercial loans was $2.4 billion and $2.0 billion and the carrying
amount of

these loans, excluding the valuation reserve, was $2.1 billion and $692 million. See Note 7 
Allowance for Credit Losses for additional information.

As a result of the adoption of new accounting guidance on purchased credit-impaired loans,
beginning January 1, 2010, pooled loans that are modified subsequent to acquisition are not
removed from the purchased credit-impaired loan pools. Prior to January 1, 2010, pooled loans that
were modified subsequent to acquisition were reviewed to compare modified contractual cash flows
to the purchased credit-impaired carrying value. If the present value of the modified cash flows
was lower than the carrying value, the loan was removed from the purchased credit-impaired loan
pool at its carrying value, as well as any related allowance for loan and lease losses, and was
classified as a TDR. The carrying value of purchased credit-impaired loan TDRs that were removed
from the purchased credit-impaired pool prior to January 1, 2010 totaled $2.1 billion at June 30,
2010, of which $1.7 billion were on accrual status. The carrying value of these modified loans, net
of allowance, was approximately 65 percent of the unpaid principal balance.

The following table shows activity for the accretable yield on purchased credit-impaired
loans. For the three months ended June 30, 2010, there was a $367 million reclassification from
accretable yield to nonaccretable difference primarily related to a reduction in estimated
interest cash flows. The reclassification to nonaccretable difference for the six months ended
June 30, 2010 was $167 million as the reduction in estimated interest cash flows was somewhat
offset by slower projected prepayment speeds during the first quarter.

Three Months Ended

Six Months Ended

(Dollars in millions)

June 30, 2010

June 30, 2010

Accretable yield, beginning of period

$

7,368

$

7,715

Accretion

(460

)

(960

)

Disposals/transfers

(74

)

(121

)

Reclassifications to nonaccretable difference

(367

)

(167

)

Accretable yield, June 30, 2010

$

6,467

$

6,467

Loans Held-for-Sale

The Corporation had LHFS of $38.0 billion and $43.9 billion at June 30, 2010 and
December 31, 2009. Proceeds from sales, securitizations and paydowns of LHFS were $150.4 billion
and $177.0 billion for the six months ended June 30, 2010 and 2009. Proceeds used for originations
and purchases of LHFS were $137.5 billion and $192.0 billion for the six months ended June 30,
2010 and 2009.

The following table summarizes the changes in the allowance for credit losses for the
three and six months ended June 30, 2010 and 2009.

Three Months Ended June 30

Six Months Ended June 30

(Dollars in millions)

2010

2009

2010

2009

Allowance for loan and lease losses, beginning of
period, before effect of the January 1 adoption of new
consolidation guidance

$

46,835

$

29,048

$

37,200

$

23,071

Allowance related to adoption of new consolidation guidance

n/a

n/a

10,788

n/a

Allowance for loan and lease losses, beginning of period

46,835

29,048

47,988

23,071

Loans and leases charged off

(10,306

)

(9,126

)

(21,807

)

(16,482

)

Recoveries of loans and leases previously charged off

749

425

1,453

839

Net charge-offs

(9,557

)

(8,701

)

(20,354

)

(15,643

)

Provision for loan and lease losses

8,105

13,347

17,704

26,699

Other

(128

)

91

(83

)

(342

)

Allowance for loan and lease losses, June 30

45,255

33,785

45,255

33,785

Reserve for unfunded lending commitments, beginning of period

1,521

2,102

1,487

421

Provision for unfunded lending commitments

-

28

206

56

Other

(108

)

(138

)

(280

)

1,515

Reserve for unfunded lending commitments, June 30

1,413

1,992

1,413

1,992

Allowance for credit losses, June 30

$

46,668

$

35,777

$

46,668

$

35,777

n/a = not applicable

During the three and six months ended June 30, 2010, the Corporation recorded $256
million and $1.1 billion in provision for credit losses with a corresponding increase in the
valuation reserve included as part of the allowance for loan and lease losses specifically for the
purchased credit-impaired loan portfolio. This compared to $855 million and $1.7 billion for the
same periods in the prior year. The amount of the allowance for loan and lease losses associated
with the purchased credit-impaired loan portfolio was $5.3 billion, $5.1 billion and $3.9 billion
at June 30, 2010, March 31, 2010 and December 31, 2009. The increase in the allowance for loan and
lease losses was a result of the provision for credit losses and the reclassification to the
nonaccretable difference of previous write-downs recorded against the allowance.

The other amount under the reserve for unfunded lending commitments for the three and six
months ended June 30, 2010 and 2009 represents the fair value of the acquired Merrill Lynch
reserve excluding those commitments accounted for under the fair value option, net of accretion,
and the impact of funding previously unfunded portions.

NOTE
8  Securitizations and Other Variable Interest Entities

The Corporation utilizes VIEs in the ordinary course of business to support its own and
its customers financing and investing needs. The Corporation routinely securitizes loans and debt
securities using VIEs as a source of funding for the Corporation and as a means of transferring
the economic risk of the loans or debt securities to third parties. The Corporation also
administers, structures or invests in other VIEs including multi-seller conduits, municipal bond
trusts, CDOs and other entities as described in more detail below.

The entity that has a controlling financial interest in a VIE is referred to as the primary
beneficiary and consolidates the VIE. In accordance with the new consolidation guidance effective
January 1, 2010, the Corporation is deemed to have a controlling financial interest and is the
primary beneficiary of a VIE if it has both the power to direct the activities of the VIE that
most significantly impact the VIEs economic performance and an obligation to absorb losses or the
right to receive benefits that could potentially be significant to the VIE. As a result of this
change in accounting, the Corporation consolidated certain VIEs and former QSPEs that were
unconsolidated prior to January 1, 2010. The net incremental impact of this accounting change on
the Corporations Consolidated Balance Sheet is set forth in the following table. The net effect
of the accounting change on January 1, 2010 shareholders equity was a $6.2 billion charge to
retained earnings, net-of-tax, primarily from the increase in the allowance for loan and lease
losses, as well as a $116 million charge to accumulated OCI, net-of-tax, for the net unrealized
losses on AFS debt securities on newly consolidated VIEs.

Ending Balance Sheet

Net Increase

Beginning Balance Sheet

(Dollars in millions)

December 31, 2009

(Decrease)

January 1, 2010

Assets

Cash and cash equivalents

$

121,339

$

2,807

$

124,146

Trading assets

182,206

6,937

189,143

Derivative assets

80,689

556

81,245

Debt securities:

Available-for-sale

301,601

(2,320

)

299,281

Held-to-maturity

9,840

(6,572

)

3,268

Total debt securities

311,441

(8,892

)

302,549

Loans and leases

900,128

102,595

1,002,723

Allowance for loan and leases losses

(37,200

)

(10,788

)

(47,988

)

Loans and leases, net of allowance

862,928

91,807

954,735

Loans held-for-sale

43,874

3,025

46,899

Deferred tax asset

27,279

3,498

30,777

All other assets

593,543

701

594,244

Total assets

$

2,223,299

$

100,439

$

2,323,738

Liabilities

Commercial paper and other short-term borrowings

$

69,524

$

22,136

$

91,660

Long-term debt

438,521

84,356

522,877

All other liabilities

1,483,810

217

1,484,027

Total liabilities

1,991,855

106,709

2,098,564

Shareholders equity

Retained earnings

71,233

(6,154

)

65,079

Accumulated other comprehensive income (loss)

(5,619

)

(116

)

(5,735

)

All other shareholders equity

165,830

-

165,830

Total shareholders equity

231,444

(6,270

)

225,174

Total liabilities and shareholders equity

$

2,223,299

$

100,439

$

2,323,738

The following tables present the assets and liabilities of consolidated and
unconsolidated VIEs if the Corporation has continuing involvement with transferred assets or if
the Corporation otherwise has a variable interest in the VIE at June 30, 2010 and December 31,
2009. The tables also present the Corporations maximum exposure to loss resulting from its
involvement with consolidated VIEs and unconsolidated VIEs in which the Corporation holds a
variable interest at June 30, 2010 and December 31, 2009. The Corporations maximum exposure to
loss is based on the unlikely event that all of the assets in the VIEs become worthless and
incorporates not only potential losses associated with assets recorded on the Corporations
Consolidated Balance Sheet but also potential losses associated with off-balance sheet commitments
such as unfunded liquidity commitments and other contractual arrangements. The Corporations
maximum exposure to loss does not include losses previously recognized through write-downs of
assets on the Corporations Consolidated Balance Sheet.

The Corporation invests in asset-backed securities issued by third party VIEs with which it
has no other form of involvement. These securities are included in
Note 3  Trading Account
Assets and Liabilities and Note 5  Securities. In addition, the Corporation uses VIEs such as
trust preferred securities trusts in connection with its funding activities, as described in Note
13  Long-term Debt to the Consolidated Financial Statements of the Corporations 2009 Annual
Report on Form 10-K. The Corporation also uses VIEs in the form of synthetic securitization
vehicles to mitigate a portion of the credit risk on its residential mortgage loan portfolio as
described in Note 6  Outstanding Loans and Leases. The Corporation has also provided support to
certain cash funds managed within GWIM, as described in
Note 14  Commitments and Contingencies
to the Consolidated Financial Statements of the Corporations 2009 Annual Report on Form 10-K.
These VIEs, which are not consolidated by the Corporation, are not included in the tables below.

Except
as described below and in Note 14  Commitments and Contingencies to the Consolidated
Financial Statements of the Corporations 2009 Annual Report on Form 10-K, as of June 30, 2010,
the Corporation has not provided financial support to consolidated or unconsolidated VIEs that it
was not previously contractually required to provide, nor does it intend to do so.

Mortgage-related Securitizations

First-Lien Mortgages

As part of its mortgage banking activities, the Corporation securitizes a portion of the
first-lien residential mortgage loans it originates or purchases from third parties generally in the form of MBS guaranteed by GSEs and from time to time under private label MBS.
Securitization occurs in conjunction with or shortly after loan closing or purchase. In addition,
the Corporation may, from time to time, securitize commercial mortgages it originates or purchases
from other entities. The Corporation also typically services loans it securitizes. Further, the
Corporation may retain beneficial interests in the securitization vehicles including senior and
subordinate securities and the equity tranche. Except as described below, the Corporation does not
provide guarantees or recourse to the securitization vehicles other than standard representations
and warranties.

The following table summarizes select information related to first-lien mortgage
securitizations for the three and six months ended June 30, 2010 and 2009.

Residential Mortgage

Non-Agency

Agency

Prime

Subprime

Alt-A

Commercial Mortgage

Three Months Ended June 30

(Dollars in millions)

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

Cash proceeds from new securitizations (1)

$

61,301

$

96,427

$

-

$

-

$

-

$

-

$

-

$

-

$

1,362

$

-

Gain (loss) on securitizations (2, 3)

(402

)

21

-

-

-

-

-

-

2

-

Cash flows received on residual interests

-

-

4

8

14

15

1

1

-

6

Initial fair value of assets acquired (4)

436

n/a

-

n/a

-

n/a

-

n/a

-

n/a

Six Months Ended June 30

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

Cash proceeds from new securitizations (1)

$

131,209

$

171,285

$

-

$

-

$

-

$

-

$

3

$

-

$

2,383

$

-

Gain (loss) on securitizations (2, 3)

(451

)

21

-

-

-

-

-

-

20

-

Cash flows received on residual interests

-

-

9

14

33

31

2

3

1

11

Initial fair value of assets acquired (4)

18,474

n/a

-

n/a

-

n/a

-

n/a

-

n/a

(1)

The Corporation sells residential mortgage loans to GSEs in the normal course of business and receives MBS in exchange which may then be sold into the market to
third party investors for cash proceeds.

(2)

Net of hedges

(3)

Substantially all of the residential mortgages securitized are initially classified as LHFS and accounted for under the fair value option. As such, gains are recognized
on these LHFS prior to securitization. During the three and six months ended June 30, 2010, the Corporation recognized $1.2 billion and $2.5 billion of gains on these LHFS compared to
$1.5 billion and $2.5 billion for the same periods in 2009. The gains were substantially offset by hedges.

(4)

All of the securities and other retained interests acquired from securitizations are initially classified as Level 2 assets within the fair value hierarchy. During the
three and six months ended June 30, 2010, there were no changes to the initial classification within the fair value hierarchy.

n/a = not applicable

The Corporation recognizes consumer MSRs from the sale or securitization of mortgage
loans. Servicing fee and ancillary fee income on consumer mortgage loans serviced, including
securitizations where the Corporation has continuing involvement, were $1.6 billion and $3.2
billion during the three and six months ended June 30, 2010 compared to $1.5 billion and $3.0
billion for the same periods in 2009. Servicing advances on consumer mortgage loans, including
securitizations where the Corporation has continuing involvement, were $20.9 billion and $19.3
billion at June 30, 2010 and December 31, 2009.
The Corporation has the option to repurchase delinquent loans out of securitization trusts,
which reduces the amount of servicing advances it is required to make. During the three and six
months ended June 30, 2010, $4.3 billion and
$8.4 billion of loans were repurchased from first-lien securitization trusts as a result of loan delinquencies or in order to perform modifications,
compared to $201 million and $957 million for the same periods in 2009.
In addition, the Corporation has retained
commercial MSRs from the sale or securitization of commercial mortgage loans. Servicing fee and
ancillary fee income (loss) on commercial mortgage loans serviced, including securitizations where
the Corporation has continuing involvement, were $(2) million and $2 million during the three and
six months ended June 30, 2010 compared to $13 million and $24 million for the same periods in
2009. Servicing advances on commercial mortgage loans, including securitizations where the
Corporation has continuing involvement, were $128 million and $109 million at June 30, 2010 and
December 31, 2009. For more information on MSRs, see Note 16  Mortgage Servicing Rights.

As a holder of these securities, the Corporation receives scheduled principal and interest payments. During the three and six months ended June 30, 2010 and 2009, there were no significant OTTI losses recorded on those
securities classified as AFS debt securities.

(3)

Principal balance outstanding includes loans the Corporation transferred and with which it has continuing involvement, and may include servicing the loans. However, these amounts do not merely represent loans transferred by the
Corporation where servicing is retained.

On January 1, 2010, the Corporation consolidated $2.5 billion of commercial mortgage
securitization trusts in which it had a controlling financial interest. These trusts were
subsequently deconsolidated as the Corporation determined that it no longer had a controlling
financial interest. When the Corporation is the servicer of the loans or holds certain subordinate
investments in a non-agency mortgage trust, the Corporation has control over the activities of the
trust. If the Corporation also holds a financial interest that could potentially be significant to
the trust, the Corporation is the primary beneficiary of and consolidates the trust. The
Corporation does not have a controlling financial interest in and therefore does not consolidate
agency trusts unless the Corporation holds substantially all of the issued securities and has the
unilateral right to liquidate the trust. Prior to 2010, substantially all of the securitization
trusts met the definition of a QSPE and as such were not subject to consolidation.

The Corporation maintains interests in home equity securitization trusts to which the
Corporation transferred home equity loans. These retained interests include senior and subordinate
securities and residual interests. The Corporation also services the loans in the trusts. There
were no securitizations of home equity loans during the three and six months ended June 30, 2010
and 2009. Collections reinvested in revolving period securitizations were $9 million and $16
million during the three and six months ended June 30, 2010 compared to $50 million and $123
million for the same periods in 2009. Cash flows received on residual interests were $4 million
and $7 million for the three and six months ended June 30, 2010 compared to $12 million and $23
million for the same periods in 2009.

The Corporation consolidated home equity loan securitization trusts of $4.5 billion, which
hold loans with principal balances outstandings of $5.1 billion net of an allowance of $573
million, in which it had a controlling financial interest on January 1, 2010. As the servicer of
the trusts, the Corporation has the power to manage the loans held in the trusts. In addition, the
Corporation may have a financial interest that could potentially be significant to the trusts
through its retained interests in senior or subordinate securities or the trusts residual
interest, through providing a guarantee to the trusts, or through providing subordinate funding to
the trusts during a rapid amortization event. In these cases, the Corporation is the primary
beneficiary of and consolidates these trusts. If the Corporation is not the servicer or does not
hold a financial interest that could potentially be significant to the trust, the Corporation does
not have a controlling financial interest and does not consolidate the trust. Prior to 2010, the
trusts met the definition of a QSPE and as such were not subject to consolidation.

The following table summarizes select information related to home equity loan securitization
trusts in which the Corporation held a variable interest at June 30, 2010 and December 31, 2009.

June 30, 2010

December 31, 2009

Retained

Retained

Interests in

Interests in

Consolidated

Unconsolidated

Unconsolidated

(Dollars in millions)

VIEs

VIEs

Total

VIEs

Maximum loss exposure (1)

$

3,380

$

9,882

$

13,262

$

13,947

On-balance sheet assets

Trading account assets (2, 3)

$

-

$

60

$

60

$

16

Available-for-sale debt securities (3, 4)

-

4

4

147

Loans and leases

3,869

-

3,869

-

Allowance for loan and lease losses

(489

)

-

(489

)

-

Total

$

3,380

$

64

$

3,444

$

163

On-balance sheet liabilities

Long-term debt

$

3,934

$

-

$

3,934

$

-

All other liabilities

28

-

28

-

Total

$

3,962

$

-

$

3,962

$

-

Principal balance outstanding

$

3,869

$

23,853

$

27,722

$

31,869

(1)

For unconsolidated VIEs, the maximum loss exposure represents outstanding trust certificates issued by
trusts in rapid amortization, net of recorded reserves and excludes liability for representations and warranties, and corporate
guarantees.

(2)

At June 30, 2010 and December 31, 2009, $38 million and $15 million of the debt securities classified as trading
account assets were senior securities and $22 million and $1 million were subordinate securities.

(3)

As a holder of these securities, the Corporation receives scheduled principal and interest payments. During the
six months ended June 30, 2010 and year ended December 31, 2009, there were no OTTI losses recorded on those securities
classified as AFS debt securities.

(4)

At June 30, 2010 and December 31, 2009, $4 million and $47 million represent subordinate debt securities held.
At December 31, 2009, $100 million are residual interests classified as AFS debt securities.

Under the terms of the Corporations home equity loan securitizations, advances are made
to borrowers when they draw on their lines of credit and the Corporation is reimbursed for those
advances from the cash flows in the securitization. During the revolving period of the
securitization, this reimbursement normally occurs within a short period after the advance.
However, when the securitization transaction has begun a rapid amortization period, reimbursement
of the Corporations advance occurs only after other parties in the securitization have received
all of the cash flows to which they are entitled. This has the effect of extending the time period
for which the Corporations advances are outstanding. In particular, if loan losses requiring
draws on monoline insurers policies, which protect the bondholders in the securitization, exceed
a specified threshold or duration, the Corporation may not receive reimbursement for all of the
funds advanced to borrowers, as the senior bondholders and the monoline insurers have priority for
repayment.

The Corporation evaluates all of its home equity loan securitizations for their potential to
experience a rapid amortization event by estimating the amount and timing of future losses on the
underlying loans, the excess spread available to cover such losses and by evaluating any estimated
shortfalls in relation to contractually defined triggers. A maximum funding obligation
attributable to rapid amortization cannot be calculated as a home equity borrower has the ability
to pay down and re-draw balances. At June 30, 2010 and December 31, 2009, home equity loan
securitization transactions in rapid amortization, including both consolidated and unconsolidated
trusts, had $13.4 billion and $14.1 billion of trust certificates outstanding. This amount is
significantly greater than the amount the Corporation expects to fund. At June 30, 2010, an
additional $438 million of trust certificates outstanding relate to home equity loan
securitization transactions that are expected to enter rapid amortization during the next 12
months. The charges that will ultimately be recorded as a result of the rapid amortization events
depend on the performance of the loans, the amount of subsequent draws and the timing of related
cash flows. At June 30, 2010 and December 31, 2009, the reserve for losses on expected future draw
obligations on the home equity loan securitizations in or expected to be in rapid amortization was
$152 million and $178 million.

The Corporation has consumer MSRs from the sale or securitization of home equity loans. The
Corporation recorded $15 million and $41 million of servicing fee income related to home equity
securitizations during the three and six months ended June 30, 2010 compared to $34 million and
$69 million for the same periods in 2009. For more information on MSRs, see Note 16  Mortgage
Servicing Rights.

The Corporation securitizes first-lien mortgage loans, generally in the form of MBS
guaranteed by GSEs. In addition, in prior years, legacy companies have sold pools of first-lien
mortgage loans and home equity loans as private label MBS or in the form of whole loans. In
connection with these securitizations and whole loan sales the Corporation and its legacy
companies made various representations and warranties to the GSEs, private label MBS investors,
financial guarantors (monolines), and other whole loan purchasers. These representations and
warranties related to, among other things, the ownership of the loan, the validity of the lien
securing the loan, the absence of delinquent taxes or liens against the property securing the
loan, the process used to select the loan for inclusion in a transaction, the loans compliance
with any applicable loan criteria established by the buyer, including underwriting standards, and
the loans compliance with applicable federal, state and local laws. Violation of these
representations and warranties may result in a requirement to repurchase mortgage loans, indemnify
or provide other recourse to an investor or securitization trust. In such cases, the repurchaser
bears any subsequent credit loss on the mortgage loans. The repurchasers credit loss may be reduced by any recourse to sellers of loans for representations and warranties previously provided.
These representations and warranties can be enforced by the investor or, in certain first-lien and
home equity securitizations where monolines have insured all or some of the related bonds issued,
by the insurer at any time over the life of the loan. However, most demands for repurchase have
occurred within the first few years of origination, generally after a loan has defaulted.
Importantly, the contractual liability to repurchase arises only if there is a breach of the
representations and warranties that materially and adversely affects the interest of the investor
or securitization trust, or if there is a breach of other standards established by the terms of
the related sale agreement.

The Corporations current operations are structured to attempt to limit the risk of
repurchase and accompanying credit exposure by ensuring consistent production of quality mortgages
and by servicing those mortgages consistent with secondary mortgage market standards. In addition,
certain securitizations include guarantees written to protect purchasers of the loans from credit
losses up to a specified amount. The probable losses to be absorbed under the representations and
warranties obligations and the guarantees are recorded as a liability when the loans are sold and
are updated by accruing a representations and warranties expense in mortgage banking income
throughout the life of the loan as necessary when additional relevant information becomes
available. The methodology used to estimate the liability for representations and warranties is a
function of the representations and warranties given and considers a variety of factors, which
include actual defaults, estimated future defaults, historical loss experience, probability that a
repurchase request will be received and probability that a loan will be required to be
repurchased.

During the three and six months ended June 30, 2010, $573 million and $1.2 billion of loans
were repurchased from first-lien investors and securitization trusts, including those in which the
monolines insured some or all of the related bonds, under its representations and warranties, and
corporate guarantees compared to $222 million and $580 million for the same periods in 2009.
During the three and six months ended June 30, 2010, the amount paid to indemnify investors and
securitization trusts, including those in which the monolines insured some or all of the related
bonds, was $165 million and $462 million compared to $59 million and $122 million for the same
periods in 2009. The repurchase claims and indemnification payments were primarily as a result of
material breaches of representations related to the loans compliance with the applicable
underwriting standards, including borrower misrepresentation, credit exceptions without sufficient
compensating factors and non-compliance with underwriting procedures, although the actual
representations made in a sales transaction and the resulting repurchase and indemnification
activity can vary by transaction or investor.

During the three and six months ended June 30, 2010, $30 million and $53 million of loans
were repurchased from home equity securitization trusts under representations and warranties and
corporate guarantees compared to $50 million
and $77 million for the same periods in 2009. During
the three and six months ended June 30, 2010, $36 million and $76 million were paid to indemnify
investors or securitization trusts compared to $37 million and $52 million for the same periods in
2009. Repurchases of loans from securitization trusts for home equity loans are primarily a result
of breaches of representations and warranties, including those where the monolines have insured
all or some of the related bonds issued by securitization trusts. In addition, the loans may be
repurchased in order to perform modifications.

Although the timing and volume has varied, repurchase and similar requests have increased
from buyers and insurers including monolines. However, a very limited number of repurchase
requests have been received related to private label MBS transactions. A loan by loan review of
all repurchase requests is performed and demands have been and will continue to be contested to
the extent not considered valid. Overall, disputes have increased with buyers and insurers
regarding representations and warranties. At June 30, 2010, the unpaid principal balance of loans
related to unresolved repurchase requests previously received from investors and insurers was
approximately $11.1 billion, including $5.6 billion from the GSEs, $4.0 billion from the
monolines, and $1.4 billion from other investors, and $33 million from private label MBS
transactions. Comparable amounts at December 31, 2009, were approximately $7.6 billion, including
$3.3 billion from the GSEs, $2.9 billion from the monolines and $1.4 billion from other investors,
and $30 million from private label MBS transactions.

The liability for representations and warranties, and corporate guarantees, is included in
accrued expenses and other liabilities and the related expense is included in mortgage banking
income. At June 30, 2010 and December 31, 2009, the liability was $3.9 billion and $3.5 billion.
For the three and six months ended June 30, 2010, the representations and warranties and corporate
guarantees expense was $1.2 billion and $1.8 billion, compared to $446 million and $880 million
for the same periods in 2009. Representations and warranties expense will vary each period as the
methodology used to estimate the expense continues to be refined based on the level of repurchase
requests, defects identified, the latest experience gained on repurchase requests and other
relevant facts and circumstances.

The Corporation and its legacy companies have an established history of working with the GSEs
on repurchase requests and has generally established a mutual understanding of what represents a
valid defect and the protocols necessary for loan repurchases. However, unlike the repurchase
protocols and experience established with GSEs, experience with the monolines and other third party
buyers has been varied and the protocols and experience with the monolines has not been as
predictable as with the GSEs. In addition, the Corporation and its legacy companies have very
limited experience with private label MBS repurchases as the number of repurchase requests
received has been very limited.

Loans have been repurchased and a liability for representations and warranties has been established for monoline
repurchase requests, based upon valid identified loan defects. A liability has also been established for monoline repurchase
requests that are in the process of review based on historical repurchase experience with each monoline to the extent such
experience provides a reliable basis on which to estimate incurred losses from future repurchase activity. A liability has also
been established related to repurchase requests subject to negotiation and unasserted requests to repurchase current and
future defaulted loans where it is believed a more consistent repurchase experience with certain monolines has been
established. For other monolines, in view of the inherent difficulty of predicting the outcome of those repurchase requests
where a valid defect has not been identified or the inherent difficulty in predicting future claim requests and the related
outcome in the case of unasserted requests to repurchase loans from the securitization trusts in which these monolines have
insured all or some of the related bonds, the Corporation cannot reasonably estimate, the eventual outcome. In addition, the
timing of the ultimate resolution, or the eventual loss, if any, related to those repurchase requests cannot be reasonably
estimated. For the monolines where there has not been established sufficient, consistent repurchase experience, it is not
possible to estimate the possible loss or a range of loss. Thus, a liability has not been established related to repurchase
requests where a valid defect has not been identified, or in the case of any unasserted requests to repurchase loans from the
securitization trusts in which such monolines have insured all or some of the related bonds.

At June 30, 2010, the unpaid principal balance of loans related to unresolved repurchase
requests previously received from monolines was approximately $4.0 billion, including $2.3 billion
that have been reviewed where it is believed a valid defect has not been identified which would
constitute an actionable breach of representations and warranties and $1.7 billion that is in the
process of review. At June 30, 2010, the unpaid principal balance of loans for which the monolines
had requested loan files for review but for which no repurchase request has been received was
approximately $9.8 billion. There will likely be additional requests for loan files in the future
leading to repurchase requests. Such requests may relate to loans that are currently in the
securitization trusts or loans that have defaulted and are no longer included in the unpaid
principal balance of the loans in the trusts. However, it is unlikely that a repurchase request
will be made for every loan in a securitization or every file requested or that a valid defect
exists for every loan repurchase request. Repurchase requests from the monolines will continue to
be evaluated and reviewed and, to the extent not considered valid, contested. The exposure to loss
from monoline repurchase requests will be determined by the number and amount of loans ultimately
repurchased offset by the applicable underlying collateral value in the real estate securing these
loans. In the unlikely event that repurchase would be required for the entire amount of all loans
in all securitizations, regardless of whether the loans were current, and without considering
whether a repurchase demand might be asserted or whether such demand actually showed a valid
defect in any loans from the securitization trusts in which monolines have insured all or some of
the related bonds, assuming the underlying collateral has no value, the maximum amount of
potential loss would be no greater than the unpaid principal balance of the loans repurchased plus
accrued interest.

Credit Card Securitizations

The Corporation securitizes originated and purchased credit card loans. The
Corporations continuing involvement with the securitization trusts includes servicing the
receivables, retaining an undivided interest (sellers interest) in the receivables, and holding
certain retained interests including senior and subordinate securities, discount receivables,
subordinate interests in accrued interest and fees on the securitized receivables, and cash
reserve accounts. The securitization trusts legal documents require the Corporation to maintain a
minimum sellers interest of four to five percent and at June 30, 2010, the Corporation was in
compliance with this requirement. The sellers interest in the trusts represents the Corporations
undivided interest in the receivables transferred to the trust and is pari passu to the investors
interest. At December 31, 2009, prior to the consolidation of the trusts, the Corporation had
$10.8 billion of sellers interest which was carried at historical cost and classified in loans.

The Corporation consolidated all credit card securitization trusts as of January 1, 2010. In
its role as administrator and servicer, the Corporation has the power to manage defaulted
receivables, add and remove accounts within certain defined parameters, and manage the trusts
liabilities. Through its retained residual and other interests, the Corporation has an obligation
to absorb losses or the right to receive benefits that could potentially be significant to the
trusts. Accordingly, the Corporation is the primary beneficiary of the trusts and therefore the
trusts are subject to consolidation. Prior to 2010, the trusts met the definition of a QSPE and as
such were not subject to consolidation.

The following table summarizes select information related to credit card securitization
trusts in which the Corporation held a variable interest at June 30, 2010 and December 31, 2009.

June 30, 2010

December 31, 2009

Consolidated

Retained Interests in

(Dollars in millions)

VIEs

Unconsolidated VIEs

Maximum loss exposure (1)

$

24,565

$

32,167

On-balance sheet assets

Trading account assets

$

-

$

80

Available-for-sale debt securities (2)

-

8,501

Held-to-maturity securities (2)

-

6,573

Loans and leases (3)

94,881

10,798

Allowance for loan and lease losses

(9,955

)

(1,268

)

Derivative assets

1,712

-

All other assets (4)

3,722

5,195

Total

$

90,360

$

29,879

On-balance sheet liabilities

Long-term debt

$

65,572

$

-

All other liabilities

223

-

Total

$

65,795

$

-

Trust loans (5)

$

94,881

$

103,309

(1)

At December 31, 2009, maximum loss exposure represents the total retained
interests held by the Corporation and also includes $2.3 billion related to a liquidity support
commitment the Corporation provided to the U.S. Credit Card Securitization Trusts commercial
paper program.

(2)

As a holder of these securities, the Corporation receives scheduled principal and
interest payments. During the year ended December 31, 2009, there were no OTTI losses recorded
on those securities classified as AFS or HTM debt securities.

(3)

At December 31, 2009, amount represents sellers interest which was classified as
loans and leases on the Corporations Consolidated Balance Sheet.

(4)

At December 31, 2009, All other assets includes discount receivables, subordinate
interests in accrued interest and fees on the securitized receivables, cash reserve accounts and
interest-only strips which are carried at fair value or amounts that approximate fair value.

(5)

At December 31, 2009, Trust loans represents the principal balance of credit card
receivables that have been legally isolated from the Corporation including those loans
represented by the sellers interest that were held on the Corporations Consolidated Balance
Sheet. At June 30, 2010, Trust loans includes accrued interest receivables of $1.3 billion. Prior
to consolidation, subordinate accrued interest receivables were included in All other assets.
These credit card receivables are legally assets of the Trust and not of the Corporation and can
only be used to settle obligations of the Trust.

For the three and six months ended June 30, 2010, $2.9 billion of new senior debt
securities were issued to external investors from the credit card securitization trusts. There
were no new debt securities issued to external investors from the credit card securitization
trusts for the three and six months ended June 30, 2009. Collections reinvested in revolving
period securitizations were $33.4 billion and $69.1 billion and cash flows received on residual
interests were $1.1 billion and $2.5 billion for the three and six months ended June 30, 2009.

At December 31, 2009, there were no recognized servicing assets or liabilities associated
with any of the credit card securitization transactions. The Corporation recorded $520 million and
$1.0 billion in servicing fees related to credit card securitizations for the three and six months
ended June 30, 2009.

During the three and six months ended June 30, 2010, subordinate securities of $1.9 billion
and $10.0 billion with a stated interest rate of zero percent were issued by the U.S. Credit Card
Securitization Trusts to the Corporation. In addition, the Corporation extended its election of
designating a specified percentage of new receivables transferred to the Trusts as discount
receivables through September 30, 2010. As the U.S. Credit Card Securitization Trusts were
consolidated on January 1, 2010, the additional subordinate securities issued and the extension of
the discount receivables election had no impact on the Corporations consolidated results for the three and six months ended June 30, 2010.
For additional information on these transactions, see Note 8  Securitizations to the
Consolidated Financial Statements of the Corporations 2009 Annual Report on Form 10-K.

During the six months ended June 30, 2010, similar actions were also taken with the U.K.
Credit Card Securitization Trusts. Additional subordinate securities of $1.5 billion with a stated
interest rate of zero percent were issued by the U.K. Credit Card Securitization Trusts to the
Corporation and the Corporation specified that from February 22, 2010 through October 31, 2010, a
percentage of new receivables transferred to the Trusts will be deemed discount receivables. Both
actions were taken in an effort to address the decline in the excess spread of the U.K. Credit
Card Securitization Trusts. As the U.K. Credit Card Securitization Trusts were consolidated on
January 1, 2010, the additional subordinate securities issued and the designation of discount
receivables had no impact on the Corporations results for the three and six months ended June 30,
2010.

As of March 31, 2010, the Corporation had terminated the U.S. Credit Card Securitization
Trusts commercial paper program and all outstanding notes were paid in full. Accordingly, there
is no commercial paper outstanding and the associated liquidity support agreement between the
Corporation and the U.S. Credit Card Securitization Trust has been terminated as of March 31,
2010. For additional information on the Corporations U.S. Credit Card Securitization Trusts
commercial paper program, see Note 8  Securitizations to the Consolidated Financial Statements
of the Corporations 2009 Annual Report on Form 10-K.

Multi-seller Conduits

The Corporation administers four multi-seller conduits which provide a low-cost funding
alternative to its customers by facilitating their access to the commercial paper market. These
customers sell or otherwise transfer assets to the conduits, which in turn issue short-term
commercial paper that is rated high-grade and is collateralized by the underlying assets. The
Corporation receives fees for providing combinations of liquidity and standby letters of credit
(SBLCs) or similar loss protection commitments to the conduits for the benefit of third party
investors. The Corporation also receives fees for serving as commercial paper placement agent and
for providing administrative services to the conduits. The Corporations liquidity commitments,
which had an aggregate notional amount outstanding of $17.7 billion and $34.5 billion at June 30,
2010 and December 31, 2009, are collateralized by various classes of assets and incorporate
features such as overcollateralization and cash reserves that are designed to provide credit
support to the conduits at a level equivalent to investment grade as determined in accordance with
internal risk rating guidelines. Third parties participate in a small number of the liquidity
facilities on a pari passu basis with the Corporation.

The following table summarizes select information related to multi-seller conduits in which
the Corporation held a variable interest at June 30, 2010 and December 31, 2009.

June 30, 2010

December 31, 2009

(Dollars in millions)

Consolidated

Consolidated

Unconsolidated

Total

Maximum loss exposure

$

17,770

$

9,388

$

25,135

$

34,523

On-balance sheet assets

Available-for-sale debt securities

$

6,698

$

3,492

$

-

$

3,492

Held-to-maturity debt securities

-

2,899

-

2,899

Loans and leases

4,435

318

318

636

Allowance for loan and lease losses

(3

)

-

-

-

All other assets

495

4

60

64

Total

$

11,625

$

6,713

$

378

$

7,091

On-balance sheet liabilities

Commercial paper and other short-term borrowings

$

11,586

$

6,748

$

-

$

6,748

Total

$

11,586

$

6,748

$

-

$

6,748

Total assets of VIEs

$

11,625

$

6,713

$

13,893

$

20,606

The Corporation consolidated all previously unconsolidated multi-seller conduits on
January 1, 2010. In its role as administrator, the Corporation has the power to determine which
assets will be held in the conduits and it has an obligation to monitor these assets for
compliance with agreed-upon lending terms. In addition, the Corporation manages the issuance of
commercial paper. Through the liquidity facilities and loss protection commitments with the
conduits, the Corporation has an obligation to absorb losses that could potentially be significant
to the VIE. Accordingly, the Corporation is the primary beneficiary of and therefore consolidates
the conduits.

Prior to 2010, the Corporation determined whether it must consolidate a multi-seller conduit
based on an analysis of projected cash flows using Monte Carlo simulations. The Corporation did
not consolidate three of the four conduits as it did not expect to absorb a majority of the
variability created by the credit risk of the assets held in the conduits. On a combined basis,
these three conduits had issued approximately $147 million of capital notes and equity interests
to third parties, $142 million of which were outstanding at December 31, 2009, which absorbed
credit risk on a first loss basis. All of these capital notes and equity interests were redeemed
as of March 31, 2010. The Corporation consolidated the fourth conduit which had not issued capital
notes to third parties.

The assets of the conduits typically carry a risk rating of AAA to BBB based on the
Corporations current internal risk rating equivalent which reflects structural enhancements of
the assets including third party insurance. Approximately 86 percent of commitments in the
conduits are supported by senior exposures. At June 30, 2010, the assets of the consolidated
conduits and the conduits unfunded liquidity commitments were mainly collateralized by $3.6
billion in trade receivables (20 percent), $2.9 billion in auto loans (16 percent), $2.5 billion
in student loans (14 percent), $720 million in credit card loans (four percent) and $1.4 billion
in equipment loans (eight percent). In addition, $2.3 billion (13 percent) of the conduits assets
and unfunded commitments were collateralized by projected cash flows from long-term contracts
(e.g., television broadcast contracts, stadium revenues and royalty payments) which, as mentioned
above, incorporate features that provide credit support. Amounts advanced under these arrangements
will be repaid when cash flows due under the long-term contracts are received. Substantially all
of this exposure is insured. In addition, $3.6 billion (20 percent) of the conduits assets and
unfunded commitments were collateralized by the conduits short-term lending arrangements with
investment funds, primarily real estate funds, which, as mentioned above, incorporate features
that provide credit support. Amounts advanced under these arrangements are secured by commitments
from a diverse group of high quality equity investors. Outstanding advances under these facilities
will be repaid when the investment funds issue capital calls.

One of the previously unconsolidated conduits held CDO investments with aggregate funded
amounts and unfunded commitments totaling $543 million at December 31, 2009. The conduit had
transferred the investments to a subsidiary of the Corporation in accordance with existing
contractual requirements and the transfers were initially accounted for as financing transactions.
After the capital notes issued by the conduit were redeemed in 2010, the conduit no longer had any
continuing exposure to credit losses of the investments and the transfers were recharacterized by
the conduit as sales to the subsidiary of the Corporation. At June 30, 2010, these CDO exposures
were recorded on the Corporations Consolidated Balance Sheet in trading account assets and
derivative liabilities and are included in the Corporations disclosure of variable interests in
CDO vehicles beginning on page 45.

Assets of the Corporation are not available to pay creditors of the conduits except to the
extent the Corporation may be obligated to perform under the liquidity commitments and SBLCs.
Assets of the conduits are not available to pay creditors of the Corporation. At June 30, 2010 and
December 31, 2009, the Corporation did not hold any commercial paper issued by the conduits other
than incidentally and in its role as a commercial paper dealer.

The Corporations liquidity, SBLCs and similar loss protection commitments obligate it to
purchase assets from the conduits at the conduits cost. If a conduit is unable to re-issue
commercial paper due to illiquidity in the commercial paper markets or deterioration in the asset
portfolio, the Corporation is obligated to provide funding subject to the following limitations.
The Corporations obligation to purchase assets under the SBLCs and similar loss protection
commitments is subject to a maximum commitment amount which is typically set at eight to 10
percent of total outstanding commercial paper. The Corporations obligation to purchase assets
under the liquidity agreements, which comprise the remainder of its exposure, is generally limited
to the amount of non-defaulted assets. Although the SBLCs are unconditional, the Corporation is
not obligated to fund under other liquidity or loss protection commitments if the conduit is the
subject of a voluntary or involuntary bankruptcy proceeding. The Corporation has not provided
support to the conduits that was not contractually required nor does it intend to provide support
in the future that is not contractually required.

Municipal Bond Trusts

The Corporation administers municipal bond trusts that hold highly rated, long-term,
fixed-rate municipal bonds, some of which are callable prior to maturity. The vast majority of the
bonds are rated AAA or AA and some of the bonds benefit from insurance provided by monolines.
The trusts obtain financing by issuing floating-rate trust certificates that
reprice on a weekly or other basis to third party investors. The Corporation may serve as
remarketing agent and/or liquidity provider for the trusts. The floating-rate investors have the
right to tender the certificates at specified dates, often with as little as seven days notice.
Should the Corporation be unable to remarket the tendered certificates, it is generally obligated
to purchase them at par under standby liquidity facilities. The Corporation is not obligated to
purchase the certificates under the standby liquidity facilities if a bonds credit rating
declines below investment grade or in the event of certain defaults or bankruptcy of the issuer
and insurer. In addition to standby liquidity facilities, the Corporation also provides default
protection or credit enhancement to investors in securities issued by certain municipal bond
trusts.

Interest and principal payments on floating-rate certificates issued by these trusts are
secured by an unconditional guarantee issued by the Corporation. In the event that the issuer of
the underlying municipal bond defaults on any payment of principal and/or interest when due, the
Corporation will make any required payments to the holders of the floating-rate certificates. The
Corporation or a customer of the Corporation may hold the residual interest in the trust. If a
customer holds the residual interest, that customer typically has the unilateral ability to
liquidate the trust at any time, while the Corporation typically has the ability to trigger the
liquidation of that trust if the market value of the bonds held in the trust declines below a
specified threshold. This arrangement is designed to limit market losses to an amount that is less
than the customers residual interest, effectively preventing the Corporation from absorbing
losses incurred on assets held within the trust when a customer holds the residual interest. The
weighted average remaining life of bonds held in the trusts at June 30, 2010 was 12.8 years. There
were no material write-downs or downgrades of assets or issuers during the three and six months
ended June 30, 2010.

The following table summarizes select information related to municipal bond trusts in which
the Corporation held a variable interest at June 30, 2010 and December 31, 2009.

June 30, 2010

December 31, 2009

(Dollars in millions)

Consolidated

Unconsolidated

Total

Consolidated

Unconsolidated

Total

Maximum loss exposure

$

4,668

$

4,313

$

8,981

$

241

$

10,143

$

10,384

On-balance sheet assets

Trading account assets

$

4,668

$

274

$

4,942

$

241

$

191

$

432

Derivative assets

-

-

-

-

167

167

Total

$

4,668

$

274

$

4,942

$

241

$

358

$

599

On-balance sheet liabilities

Commercial paper and other short-term borrowings

$

4,888

$

-

$

4,888

$

-

$

-

$

-

All other liabilities

-

-

-

2

287

289

Total

$

4,888

$

-

$

4,888

$

2

$

287

$

289

Total assets of VIEs

$

4,668

$

6,442

$

11,110

$

241

$

12,247

$

12,488

On January 1, 2010, the Corporation consolidated $5.1 billion of municipal bond trusts
in which it has a controlling financial interest. As transferor of assets into a trust, the
Corporation has the power to determine which assets will be held in the trust and to structure the
liquidity facilities, default protection and credit enhancement, if applicable. In some instances,
the Corporation retains a residual interest in such trusts and has loss exposure that could
potentially be significant to the trust through the residual interest, liquidity facilities and
other arrangements. The Corporation is also the remarketing agent through which it has the power
to direct the activities that most significantly impact economic performance. Accordingly, the
Corporation is the primary beneficiary and consolidates these trusts. In other instances, one or
more third party investors hold the residual interest and through that interest have the right to
liquidate the trust. The Corporation does not consolidate these trusts.

Prior to 2010, some of the municipal bond trusts were QSPEs and as such were not subject to
consolidation by the Corporation. The Corporation consolidated those trusts that were not QSPEs if
it held the residual interests or otherwise expected to absorb a majority of the variability
created by changes in fair value of assets in the trusts and changes in market rates of interest.
The Corporation did not consolidate a trust if the customer held the residual interest and the
Corporation was protected from loss in connection with its liquidity obligations.

During the three and six months ended June 30, 2010, the Corporation was the transferor of
assets into unconsolidated municipal bond trusts and received cash proceeds from new
securitizations of $369 million and $782 million as compared to none during the same periods in
2009. At June 30, 2010 and December 31, 2009, the principal balance outstanding for unconsolidated
municipal bond securitization trusts for which the Corporation was transferor was $1.9 billion and
$6.9 billion.

The Corporations liquidity commitments to unconsolidated municipal bond trusts totaled $4.0
billion and $9.8 billion at June 30, 2010 and December 31, 2009. At June 30, 2010 and December 31,
2009, the Corporation held $274 million and $155 million of floating-rate certificates issued by
unconsolidated municipal bond trusts in trading account assets. At December 31, 2009, the
Corporation also held residual interests of $203 million.

Collateralized Debt Obligation Vehicles

CDO vehicles hold diversified pools of fixed-income securities, typically corporate debt
or asset-backed securities, which they fund by issuing multiple tranches of debt and equity
securities. Synthetic CDOs enter into a portfolio of credit default swaps to synthetically create
exposure to fixed-income securities. Collateralized loan obligations (CLOs) are a subset of CDOs
which hold pools of loans, typically corporate loans or commercial mortgages. CDOs are typically
managed by third party portfolio managers. The Corporation transfers assets to these CDOs, holds
securities issued by the CDOs and may be a derivative counterparty to the CDOs, including a credit
default swap counterparty for synthetic CDOs. The Corporation has also entered into total return
swaps with certain CDOs whereby the Corporation will absorb the economic returns generated by
specified assets held by the CDO. The Corporation receives fees for structuring CDOs and providing
liquidity support for super senior tranches of securities issued by certain CDOs. No third parties
provide a significant amount of similar commitments to these CDOs.

The following table summarizes select information related to CDO vehicles in which the
Corporation held a variable interest at June 30, 2010 and December 31, 2009.

June 30, 2010

December 31, 2009

(Dollars in millions)

Consolidated

Unconsolidated

Total

Consolidated

Unconsolidated

Total

Maximum loss exposure (1)

$

3,474

$

4,588

$

8,062

$

3,863

$

6,987

$

10,850

On-balance sheet assets

Trading account assets

$

2,898

$

1,234

$

4,132

$

2,785

$

1,253

$

4,038

Derivative assets

-

1,103

1,103

-

2,085

2,085

Available-for-sale debt securities

1,008

268

1,276

1,414

368

1,782

All other assets

39

129

168

-

166

166

Total

$

3,945

$

2,734

$

6,679

$

4,199

$

3,872

$

8,071

On-balance sheet liabilities

Derivative liabilities

$

10

$

45

$

55

$

-

$

781

$

781

Long-term debt

3,032

-

3,032

2,753

-

2,753

Total

$

3,042

$

45

$

3,087

$

2,753

$

781

$

3,534

Total assets of VIEs

$

3,945

$

48,510

$

52,455

$

4,199

$

56,590

$

60,789

(1)

Maximum loss exposure has not been reduced to reflect the benefit of purchased insurance.

The Corporations maximum loss exposure of $8.1 billion includes $2.2 billion of super
senior CDO exposure, $2.4 billion of exposure to CDO financing facilities and $3.5 billion of
other non-super senior exposure. This exposure is calculated on a gross basis and does not reflect
any benefit from purchased insurance. Net of purchased insurance but including securities retained
from liquidations of CDOs, the Corporations net exposure to super senior CDO-related positions
was $1.5 billion at June 30, 2010. The CDO financing facilities, which are consolidated, obtain
funding from third parties for CDO positions which are principally classified in trading account
assets on the Corporations Consolidated Balance Sheet. The CDO financing facilities long-term
debt at June 30, 2010 totaled $2.5 billion, all of which has recourse to the general credit of the
Corporation.

The Corporation consolidated $220 million of CDOs on January 1, 2010. The Corporation does
not routinely serve as collateral manager for CDOs and, therefore, does not typically have the
power to direct the activities that most significantly impact the economic performance of a CDO.
However, following an event of default, if the Corporation is a majority holder of senior
securities issued by a CDO and acquires the power to manage the assets of the CDO, the Corporation
consolidates the CDO. Generally, the creditors of the consolidated CDOs have no recourse to the
general credit of the Corporation. Prior to 2010, the Corporation evaluated whether it must
consolidate a CDO based principally on a determination as to which party was expected to absorb a
majority of the credit risk created by the assets of the CDO.

At June 30, 2010, the Corporation had $2.2 billion notional amount of super senior liquidity
exposure to CDO vehicles. This amount includes $920 million notional amount of liquidity support
provided to certain synthetic CDOs, including $333 million to a consolidated CDO, in the form of
unfunded lending commitments related to super senior securities. The lending commitments obligate
the Corporation to purchase the super senior CDO securities at par value if the CDOs need cash to
make payments due under credit default swaps held by the CDOs. The Corporation also had $1.3
billion notional amount of liquidity exposure to non-special purpose entity (SPE) third parties
that hold super senior cash positions on the Corporations behalf.

Liquidity-related commitments also include $1.4 billion notional amount of derivative
contracts with unconsolidated SPEs, principally CDO vehicles, which hold non-super senior CDO debt
securities or other debt securities on the Corporations behalf. These derivatives are typically
in the form of total return swaps which obligate the Corporation to purchase the securities at the
SPEs cost to acquire the securities, generally as a result of ratings downgrades. The underlying
securities are senior securities and substantially all of the Corporations exposures are insured.
Accordingly, the Corporations exposure to loss consists principally of counterparty risk to the
insurers. These derivatives are included in the $1.5 billion notional amount of derivative
contracts through which the Corporation obtains funding from third party SPEs, described in Note
11  Commitments and Contingencies.

The Corporations $3.6 billion of aggregate liquidity exposure to CDOs at June 30, 2010 is
included in the above table to the extent that the Corporation sponsored the CDO vehicle or the
liquidity exposure to the CDO vehicle is more than insignificant as compared to total assets of
the CDO vehicle. Liquidity exposure included in the table is reported net of previously recorded
losses.

The Corporations maximum exposure to loss is significantly less than the total assets of the
CDO vehicles in the table above because the Corporation typically has exposure to only a portion
of the total assets. The Corporation has also purchased credit protection from some of the same
CDO vehicles in which it invested, thus reducing net exposure to future loss.

Customer Vehicles

Customer vehicles include credit-linked and equity-linked note vehicles, repackaging
vehicles and asset acquisition vehicles, which are typically created on behalf of customers who
wish to obtain market or credit exposure to a specific company or financial instrument.

The following table summarizes select information related to customer vehicles in which the
Corporation held a variable interest at June 30, 2010 and December 31, 2009.

June 30, 2010

December 31, 2009

(Dollars in millions)

Consolidated

Unconsolidated

Total

Consolidated

Unconsolidated

Total

Maximum loss exposure

$

4,019

$

3,423

$

7,442

$

277

$

10,229

$

10,506

On-balance sheet assets

Trading account assets

$

1,812

$

223

$

2,035

$

183

$

1,334

$

1,517

Derivative assets

-

937

937

78

4,815

4,893

Loans and leases

-

-

-

-

65

65

Loans held-for-sale

839

-

839

-

-

-

All other assets

2,248

16

2,264

16

-

16

Total

$

4,899

$

1,176

$

6,075

$

277

$

6,214

$

6,491

On-balance sheet liabilities

Derivative liabilities

$

-

$

46

$

46

$

-

$

267

$

267

Commercial paper and other short-term borrowings

18

-

18

22

-

22

Long-term debt

2,308

-

2,308

50

74

124

All other liabilities

-

133

133

-

1,357

1,357

Total

$

2,326

$

179

$

2,505

$

72

$

1,698

$

1,770

Total assets of VIEs

$

4,899

$

5,673

$

10,572

$

277

$

16,487

$

16,764

On January 1, 2010, the Corporation consolidated $5.9 billion of customer vehicles in
which it has a controlling financial interest.

Credit-linked and equity-linked note vehicles issue notes which pay a return that is linked
to the credit or equity risk of a specified company or debt instrument. The vehicles purchase
high-grade assets as collateral and enter into credit default swaps or equity derivatives to
synthetically create the credit or equity risk to pay the specified return on the notes. The
Corporation is typically the counterparty for some or all of the credit and equity derivatives
and, to a lesser extent, it may invest in securities issued by the vehicles. The Corporation may
also enter into interest rate or foreign currency derivatives with the vehicles. In certain
instances, the Corporation has entered into derivative contracts, typically total return swaps,
with vehicles which obligate the Corporation to purchase securities held as collateral at the
vehicles cost, generally as a result of ratings downgrades. The underlying securities are senior
securities and substantially all of the Corporations exposures are insured. Accordingly, the
Corporations exposure to loss consists principally of counterparty risk to the insurers. At June
30, 2010, the notional amount of such derivative contracts with unconsolidated vehicles was $149
million. This amount is included in the $1.5 billion notional amount of derivative contracts
through which the Corporation obtains funding from unconsolidated SPEs, described in Note 11 
Commitments and Contingencies. The Corporation also had approximately $453 million of other
liquidity commitments, including written put options and collateral value guarantees, with
unconsolidated credit-linked and equity-linked note vehicles at June 30, 2010.

The Corporation consolidates these vehicles when it has control over the initial design of
the vehicle and also absorbs potentially significant gains or losses through derivative contracts
or the collateral assets. The Corporation does not consolidate a vehicle if a single investor
controlled the initial design of the vehicle or if the Corporation does not have a variable
interest that could potentially be significant to the vehicle. Credit-linked and equity-linked
note vehicles were not

consolidated prior to 2010 because the Corporation did not absorb a majority of the economic risks
and rewards of the vehicles.

Asset acquisition vehicles acquire financial instruments, typically loans, at the direction
of a single customer and obtain funding through the issuance of structured notes to the
Corporation. At the time the vehicle acquires an asset, the Corporation enters into total return
swaps with the customer such that the economic returns of the asset are passed through to the
customer. The Corporation is exposed to counterparty credit risk if the asset declines in value
and the customer defaults on its obligation to the Corporation under the total return swaps. The
Corporations risk may be mitigated by collateral or other arrangements. The Corporation
consolidates these vehicles because it has the power to manage the assets in the vehicles and owns
all of the structured notes issued by the vehicles. These vehicles were not consolidated prior to
2010 because the variability created by the assets in the vehicles was considered to be absorbed
by the Corporations customers through the total return swaps.

The following table summarizes select information related to other VIEs in which the
Corporation held a variable interest at June 30, 2010 and December 31, 2009.

June 30, 2010

December 31, 2009

(Dollars in millions)

Consolidated

Unconsolidated

Total

Consolidated

Unconsolidated

Total

Maximum loss exposure

$

15,617

$

31,363

$

46,980

$

13,111

$

14,373

$

27,484

On-balance sheet assets

Trading account assets

$

1,297

$

2,142

$

3,439

$

269

$

543

$

812

Derivative assets

229

250

479

1,096

86

1,182

Available-for-sale debt securities

1,787

17,465

19,252

1,822

2,439

4,261

Loans and leases

19,116

2,862

21,978

16,112

1,200

17,312

Allowance for loan and lease losses

(86

)

(31

)

(117

)

(130

)

(10

)

(140

)

Loans held-for-sale

430

726

1,156

197

-

197

All other assets

2,587

8,895

11,482

1,310

8,875

10,185

Total

$

25,360

$

32,309

$

57,669

$

20,676

$

13,133

$

33,809

On-balance sheet liabilities

Derivative liabilities

$

-

$

20

$

20

$

-

$

80

$

80

Commercial paper and other
short-term borrowings

1,356

-

1,356

965

-

965

Long-term debt

8,950

890

9,840

7,341

-

7,341

All other liabilities

1,495

1,411

2,906

3,123

1,626

4,749

Total

$

11,801

$

2,321

$

14,122

$

11,429

$

1,706

$

13,135

Total assets of VIEs

$

25,360

$

50,243

$

75,603

$

20,676

$

25,914

$

46,590

Investment Vehicles

The Corporation sponsors, invests in or provides financing to a variety of investment
vehicles that hold loans, real estate, debt securities or other financial instruments and are
designed to provide the desired investment profile to investors. At June 30, 2010 and December 31,
2009, the Corporations consolidated investment vehicles had total assets of $7.5 billion and $5.7
billion. The Corporation also held investments in unconsolidated vehicles with total assets of
$11.5 billion and $8.8 billion at June 30, 2010 and December 31, 2009. The Corporations maximum
exposure to loss associated with consolidated and unconsolidated investment vehicles totaled $12.9
billion and $10.7 billion at June 30, 2010 and December 31, 2009.

The Corporation consolidated $2.5 billion of investment vehicles on January 1, 2010. This
amount included a real estate investment fund with $1.5 billion of assets which is designed to
provide returns to clients through limited partnership holdings. Affiliates of the Corporation are
the general partner and also have a limited partnership interest in the fund.

Although it is without any obligation or commitment to do so, the Corporation anticipates that it
may, in its sole discretion, elect to provide support to the entity and therefore considers the
entity to be a VIE. The Corporation consolidates an investment vehicle that meets the definition
of a VIE if it manages the assets or otherwise controls the activities of the vehicle and also
holds a variable interest that could potentially be significant to the vehicle. Prior to 2010, the
Corporation consolidated an investment vehicle that met the definition of a VIE if the
Corporations investment or guarantee was expected to absorb a majority of the variability created
by the assets of the funds.

Leveraged Lease Trusts

The Corporations net investment in consolidated leveraged lease trusts totaled $5.3 billion
and $5.6 billion at June 30, 2010 and December 31, 2009. The trusts hold long-lived equipment such
as rail cars, power generation and distribution equipment, and commercial aircraft. The
Corporation consolidates these trusts because it structured the trusts, giving the Corporation
power over the limited activities of the trusts, and holds a significant residual interest. Prior
to 2010, the Corporation consolidated these trusts because the residual interest was expected to
absorb a majority of the variability driven by credit risk of the lessee and, in some cases, by
the residual risk of the leased property. The net investment represents the Corporations maximum
loss exposure to the trusts in the unlikely event that the leveraged lease investments become
worthless. Debt issued by the leveraged lease trusts is nonrecourse to the Corporation. The
Corporation has no liquidity exposure to these leveraged lease trusts.

Automobile and Other Securitization Trusts

At June 30, 2010 and December 31, 2009, the Corporation serviced asset-backed securitization
trusts with outstanding unpaid principal balances of $12.0 billion and $11.9 billion,
substantially all of which held automobile loans. The Corporations maximum exposure to loss
associated with these consolidated and unconsolidated trusts totaled $2.6 billion and $3.5 billion
at June 30, 2010 and December 31, 2009. The Corporation transferred $1.4 billion and $3.0 billion
of automobile loans to these trusts in the three and six months ended June 30, 2010 and $9.0
billion during the year ended December 31, 2009.

On January 1, 2010, the Corporation consolidated one automobile securitization trust with
$2.6 billion of assets in which it had a controlling financial interest. Prior to 2010, this trust
met the definition of a QSPE and was therefore not subject to consolidation. The Corporation held
$2.1 billion of senior securities, $195 million of subordinate securities and $83 million of
residual interests issued by this trust at December 31, 2009. The remaining automobile trusts,
which were not QSPEs, were previously consolidated and continue to be consolidated under the new
consolidation guidance because the Corporation services the automobile loans and also holds a
significant amount of beneficial interests issued by the trusts. The assets of the automobile
trusts are legally assets of the trusts and not the Corporation and can only be used to settle
obligations of the trusts. The creditors of the automobile trusts have no recourse to the
Corporation.

Asset Acquisition Conduits

The Corporation administers three asset acquisition conduits which acquire assets on behalf
of the Corporation or its customers. These conduits had total assets of $1.4 billion and $965
million at June 30, 2010 and December 31, 2009. Two of the conduits, which were unconsolidated
prior to 2010, acquire assets at the request of customers who wish to benefit from the economic
returns of the specified assets on a leveraged basis, which consist principally of liquid
exchange-traded equity securities. The third conduit holds subordinate debt securities for the
Corporations benefit. The conduits obtain funding by issuing commercial paper and subordinate
certificates to third party investors. Repayment of the commercial paper and certificates is
assured by total return swaps between the Corporation and the conduits. When a conduit acquires
assets for the benefit of the Corporations customers, the Corporation enters into back-to-back
total return swaps with the conduit and the customer such that the economic returns of the assets
are passed through to the customer. The Corporations exposure to the counterparty credit risk of
its customers is mitigated by the ability to liquidate an asset held in the conduit if the
customer defaults on its obligation. The Corporation receives fees for serving as commercial paper
placement agent and for providing administrative services to the conduits. At June 30, 2010 and
December 31, 2009, the Corporation did not hold any commercial paper issued by the asset
acquisition conduits other than incidentally and in its role as a commercial paper dealer.

On January 1, 2010, the Corporation consolidated the two previously unconsolidated asset
acquisition conduits with total assets of $1.4 billion. In its role as administrator, the
Corporation has the power to determine which assets will be held in the conduits and to manage the
issuance of commercial paper. Through the total return swaps with the conduits, the Corporation
initially absorbs gains and losses incurred due to changes in market value of assets held in the
conduits. Although the Corporation then transfers gains and losses to customers through the
back-to-back total return swaps, its financial interest could potentially be significant to the
VIE. Accordingly, the Corporation is the primary beneficiary of and consolidates all of the asset
acquisition conduits.

Prior to 2010, the Corporation determined whether it must consolidate an asset acquisition
conduit based on the design of the conduit and whether the third party investors are exposed to
the Corporations credit risk or the market risk of the assets. Interest rate risk was not
included in the cash flow analysis because the conduits are not designed to absorb and pass along
interest rate risk to investors who receive current rates of interest that are appropriate for the
tenor and relative risk of their investments. When a conduit acquired assets for the benefit of
the Corporations customers, the Corporation entered into back-to-back total return swaps with the
conduit and the customers such that the economic returns of the assets are passed through to the
customers, none of whom have a variable interest in the conduit as a whole. The third party
investors are exposed primarily to the credit risk of the Corporation. Accordingly, the
Corporation did not consolidate the conduit. When a conduit acquires assets on the Corporations
behalf and the Corporation absorbs the market risk of the assets, it consolidates the conduit.

Real Estate Vehicles

The Corporation held investments in unconsolidated real estate vehicles of $5.2 billion and
$4.8 billion at June 30, 2010 and December 31, 2009, which consisted of limited partnership
investments in unconsolidated limited partnerships that finance the construction and
rehabilitation of affordable rental housing. The Corporation earns a return primarily through the
receipt of tax credits allocated to the affordable housing projects. The Corporations risk of
loss is mitigated by policies requiring that the project qualify for the expected tax credits
prior to making its investment. The Corporation may from time to time be asked to invest
additional amounts to support a troubled project. Such additional investments have not been and
are not expected to be significant.

Beginning January 1, 2010, the Corporation determines whether it must consolidate these
limited partnerships principally based on an identification of the party that has power over the
activities of the partnership. Typically, an unrelated third party is the general partner and the
Corporation does not consolidate the partnership.

Prior to 2010, the Corporation determined whether it must consolidate these limited
partnerships based on a determination as to which party is expected to absorb a majority of the
risk created by the real estate held in the vehicle, which may include construction, market and
operating risk. Typically, the general partner in a limited partnership will absorb a majority of
this risk due to the legal nature of the limited partnership structure and, accordingly, would
consolidate the vehicle.

Resecuritization Trusts

During the three and six months ended June 30, 2010, the Corporation resecuritized $27.9
billion and $68.7 billion of MBS, including $12.4 billion and $47.0 billion of securities
purchased from third parties, compared to $11.8 billion and $16.0 billion for the same periods in
2009. Net losses during the holding period totaled $53 million and $86 million for the three and
six months ended June 30, 2010 compared to net gains of $37 million and $62 million for the same
periods in 2009. At June 30, 2010, the Corporation held $15.9 billion and $2.0 billion of senior
securities classified in AFS debt securities and trading account assets, and $1.5 billion and $162
million of subordinate securities classified in AFS debt securities and trading account assets
which were issued by unconsolidated resecuritization trusts which had total assets of $32.6
billion. At December 31, 2009, the Corporation held $543 million of senior securities classified
in trading account assets which were issued by unconsolidated resecuritization trusts which had
total assets of $7.4 billion. All of the retained interests were valued using quoted market prices
or observable market inputs (Level 2 of the fair value hierarchy). The Corporation consolidates a
resecuritization trust if it has sole discretion over the design of the trust, including the
identification of securities to be transferred in and the structure of securities to be issued and
also retains a variable interest that could potentially be significant to the trust. If one or a
limited number of third party investors purchase a significant portion of subordinate securities
and share responsibility for the design of the trust, the Corporation does not consolidate the
trust. Prior to 2010, these resecuritization trusts were typically QSPEs and as such were not
subject to consolidation by the Corporation.

Other Transactions

Prior to 2010, the Corporation transferred pools of securities to certain independent third
parties and provided financing for approximately 75 percent of the purchase price under
asset-backed financing arrangements. At June 30, 2010 and December 31, 2009, the Corporations
maximum loss exposure under these financing arrangements was $6.4 billion and $6.8 billion,
substantially all of which was classified as loans on the Corporations Consolidated Balance Sheet.
All principal and interest payments have been received when due in accordance with their
contractual terms. These arrangements are not included in the Other VIEs table on page 48 because
the purchasers are not VIEs.

The following table presents goodwill balances at June 30, 2010 and December 31, 2009. As
discussed in more detail in Note 17  Business Segment Information, on January 1, 2010, the
Corporation realigned the former Global Banking and Global Markets business segments. There was no
impact on the reporting units used in goodwill impairment testing. The reporting units utilized
for goodwill impairment tests are the business segments or one level below the business segments.

June 30

December 31

(Dollars in millions)

2010

2009

Deposits

$

17,875

$

17,875

Global Card Services

22,279

22,292

Home Loans & Insurance

4,797

4,797

Global Commercial Banking

20,656

20,656

Global Banking & Markets

10,231

10,252

Global Wealth & Investment Management

9,930

10,411

All Other

33

31

Total goodwill

$

85,801

$

86,314

Based on the results of the annual impairment test at June 30, 2009, the interim period
tests subsequent thereto, and due to continued stress on Home Loans & Insurance and Global Card
Services as a result of current market conditions, the Corporation concluded that an additional
impairment analysis should be performed for these two reporting units in the three months ended
June 30, 2010. In performing the first step of the additional impairment analysis, the Corporation
compared the fair value of each reporting unit to its carrying value, including goodwill.
Consistent with the 2009 annual test, the Corporation utilized a combination of the market approach and
the income approach for Home Loans & Insurance and the income approach for Global Card Services.
For both Home Loans & Insurance and Global Card Services, the carrying value exceeded the fair
value, and accordingly, step two of the analysis was performed comparing the implied fair value of the
reporting units goodwill with the carrying amount of that goodwill. The results of
step two of the goodwill impairment test for Home Loans & Insurance and Global Card
Services for the three months ended June 30, 2010 were
consistent with the results of the 2009 annual impairment test and the interim impairment tests, indicating that no goodwill was impaired as of June 30, 2010. The
Corporation is in the process of completing its annual impairment test for all reporting units as
of June 30, 2010.

On
July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Financial
Reform Act) was signed into law. Under the Financial Reform Act and its amendment to the
Electronic Fund Transfer Act, the Federal Reserve Board must adopt rules within nine months
of enactment of the Financial Reform Act regarding the interchange fees that may be charged
with respect to electronic debit transactions. Those rules will take effect one year after
enactment of the Financial Reform Act. The Financial Reform Act and the applicable rules are
expected to materially reduce the future revenues generated by the debit card business of the
Corporation. However, the Corporation expects to implement a number of actions that would
mitigate some of the impact when the laws and regulations become effective.

The
Corporations consumer and small business card products, including the debit card business, are
part of an integrated platform within Global Card Services. The Corporations current estimate
of revenue loss due to the Financial Reform Act will materially reduce the carrying value of
the $22.3 billion of goodwill applicable to Global Card Services. Based on the Corporations
current estimates of the revenue impact to this business segment, the Corporation expects to
record a non-tax deductible goodwill impairment charge for Global Card Services in the three
months ended September 30, 2010 that is estimated to be in the range of $7 billion to
$10 billion. This estimate does not include potential mitigation actions to recapture lost
revenue. A number of these actions may not reduce the goodwill impairment because they will
generate revenue for business segments other than Global Card
Services (e.g., Deposits) or because the actions
may be identified and implemented after the impairment charge has been recorded.
The impairment charge, which is a non-cash item, will have
no impact on the Corporations reported Tier 1 and tangible equity capital ratios.

The following table presents the gross carrying values and accumulated amortization related
to intangible assets at June 30, 2010 and December 31, 2009.

June 30, 2010

December 31, 2009

Gross Carrying

Accumulated

Gross Carrying

Accumulated

(Dollars in millions)

Value

Amortization

Value

Amortization

Purchased credit card relationships

$

7,136

$

3,769

$

7,179

$

3,452

Core deposit intangibles

5,394

3,910

5,394

3,722

Customer relationships

4,232

1,001

4,232

760

Affinity relationships

1,643

826

1,651

751

Other intangibles

3,144

1,247

3,438

1,183

Total intangible assets

$

21,549

$

10,753

$

21,894

$

9,868

Amortization of intangibles expense was $439 million and $885 million for the three and
six months ended June 30, 2010, compared to $516 million and $1.0 billion for the same periods in
2009. The Corporation estimates aggregate amortization expense will be approximately $422 million
for each of the remaining quarters of 2010. The Corporation estimates aggregate amortization
expense will be approximately $1.5 billion, $1.3 billion, $1.2 billion, $1.0 billion and $900
million for 2011 through 2015, respectively.

NOTE
10  Long-term Debt

The following table presents the Corporations long-term debt at June 30, 2010 and
December 31, 2009.

June 30

December 31

(Dollars in millions)

2010

2009

Long-term debt issued by Bank of America Corporation and subsidiaries

$

276,351

$

283,570

Long-term debt issued by Merrill Lynch & Co., Inc. and subsidiaries

128,546

154,951

Long-term debt issued by consolidated VIEs under new consolidation guidance

85,186

n/a

Total long-term debt

$

490,083

$

438,521

n/a = not applicable

At June 30, 2010, long-term debt issued by consolidated VIEs including credit card,
automobile, home equity and first-lien mortgage-related securitization trusts totaled $65.6 billion, $8.6 billion,
$3.9 billion and $1.4 billion, respectively, and $5.7 billion of long-term debt was issued by
other consolidated VIEs. Long-term debt issued by VIEs is collateralized by the assets of the
VIEs.

At June 30, 2010, the Corporation has not assumed or guaranteed $126 billion of long-term
debt that was issued or guaranteed by Merrill Lynch & Co., Inc. or its subsidiaries prior to the
acquisition of Merrill Lynch by the Corporation. Beginning late in the third quarter of 2009, in
connection with the update or renewal of certain Merrill Lynch international securities offering
programs, the Corporation agreed to guarantee debt securities, warrants and/or certificates issued
by certain subsidiaries of Merrill Lynch & Co., Inc. on a going forward basis. All existing
Merrill Lynch & Co., Inc. guarantees of securities issued by those same Merrill Lynch subsidiaries
under various international securities offering programs will remain in full force and effect as
long as those securities are outstanding, and the Corporation has not assumed any of those prior
Merrill Lynch & Co., Inc. guarantees or otherwise guaranteed such securities.

Certain structured
notes issued by Merrill Lynch are accounted for under the fair value option. For more information
on these structured notes, see Note 14  Fair Value Measurements.

Aggregate annual maturities of long-term debt obligations at June 30, 2010 are summarized in
the following table.

(Dollars in millions)

2010

2011

2012

2013

2014

Thereafter

Total

Bank of America Corporation

$

13,181

$

16,455

$

41,084

$

7,436

$

14,859

$

88,111

$

181,126

Merrill Lynch & Co., Inc. and subsidiaries

15,857

18,655

17,328

16,666

15,267

44,773

128,546

Bank of America, N.A. and other subsidiaries

15,809

4,117

4,798

6

82

9,871

34,683

Other

13,446

23,786

13,758

5,155

1,728

2,669

60,542

Total long-term debt excluding consolidated VIEs

58,293

63,013

76,968

29,263

31,936

145,424

404,897

Long-term debt issued by consolidated VIEs

13,363

18,344

12,677

16,591

8,777

15,434

85,186

Total long-term debt

$

71,656

$

81,357

$

89,645

$

45,854

$

40,713

$

160,858

$

490,083

Included in the above table are certain structured notes that contain provisions whereby
the borrowings are redeemable at the option of the holder (put options) at specified dates prior
to maturity. Other structured notes have coupon or repayment terms linked to the performance of
debt or equity securities, indices, currencies or commodities and the maturity may be accelerated
based on the value of a referenced index or security. In both cases, the Corporation or a
subsidiary may be required to settle the obligation for cash or other securities prior to the
contractual maturity date. These borrowings are reflected in the above table as maturing at their
earliest put or redemption date.

NOTE
11  Commitments and Contingencies

In the normal course of business, the Corporation enters into a number of off-balance
sheet commitments. These commitments expose the Corporation to varying degrees of credit and
market risk and are subject to the same credit and market risk limitation reviews as those
instruments recorded on the Corporations Consolidated Balance Sheet. For additional information
on commitments and contingencies, see Note 14  Commitments and Contingencies to the Consolidated
Financial Statements of the Corporations 2009 Annual Report on Form 10-K.

Credit Extension Commitments

The Corporation enters into commitments to extend credit such as loan commitments, SBLCs
and commercial letters of credit to meet the financing needs of its customers. The unfunded
legally binding lending commitments shown in the following table are net of amounts distributed
(e.g., syndicated) to other financial institutions of $29.5 billion and $30.9 billion at June 30,
2010 and December 31, 2009. At June 30, 2010, the carrying amount of these commitments, excluding
commitments accounted for under the fair value option, was $1.4 billion, including deferred
revenue of $33 million and a reserve for unfunded lending commitments of $1.4 billion. At December
31, 2009, the comparable amounts were $1.5 billion, $34 million and $1.5 billion, respectively.
The carrying amount of these commitments is classified in accrued expenses and other liabilities.

The table below also includes the notional amount of commitments of $27.6 billion and $27.0
billion at June 30, 2010 and December 31, 2009, that are accounted for under the fair value
option. However, the table below excludes fair value adjustments of $947 million and $950 million
on these commitments, which are classified in accrued expenses and other liabilities. For
information regarding the Corporations loan commitments accounted for under the fair value
option, see Note 14  Fair Value Measurements.

Expires after 1

Expires after 3

Expires in 1

Year through 3

Years through

Expires after

(Dollars in millions)

Year or Less

Years

5 Years

5 Years

Total

Credit extension commitments, June 30, 2010

Loan commitments

$

210,051

$

166,855

$

27,879

$

38,073

$

442,858

Home equity lines of credit

2,096

3,729

14,664

66,960

87,449

Standby letters of credit and financial guarantees (1)

29,203

22,391

3,156

12,560

67,310

Commercial letters of credit

2,602

34

-

1,853

4,489

Legally binding commitments

243,952

193,009

45,699

119,446

602,106

Credit card lines (2)

510,597

-

-

-

510,597

Total credit extension commitments

$

754,549

$

193,009

$

45,699

$

119,446

$

1,112,703

Credit extension commitments, December 31, 2009

Loan commitments

$

149,248

$

187,585

$

30,897

$

28,489

$

396,219

Home equity lines of credit

1,810

3,272

10,667

76,924

92,673

Standby letters of credit and financial guarantees (1)

29,794

21,285

4,923

13,740

69,742

Commercial letters of credit

2,020

40

-

1,465

3,525

Legally binding commitments

182,872

212,182

46,487

120,618

562,159

Credit card lines (2)

541,919

-

-

-

541,919

Total credit extension commitments

$

724,791

$

212,182

$

46,487

$

120,618

$

1,104,078

(1)

At June 30, 2010, the notional amounts of SBLCs and financial guarantees
classified as investment grade and non-investment grade based on the credit quality of the
underlying reference name within the instrument were $40.0 billion and $27.3 billion compared
to $39.7 billion and $30.0 billion at December 31, 2009.

(2)

Includes business card unused lines of credit.

Legally binding commitments to extend credit generally have specified rates and
maturities. Certain of these commitments have adverse change clauses that help to protect the
Corporation against deterioration in the borrowers ability to pay.

Other Commitments

Global Principal Investments and Other Equity Investments

At June 30, 2010 and December 31, 2009, the Corporation had unfunded equity investment
commitments of approximately $1.9 billion and $2.8 billion.
In light of proposed Basel regulatory capital changes related to unfunded commitments, the Corporation has actively reduced these
commitments in a series of transactions involving its private equity fund investments. The
Corporation entered into agreements to sell $2.9 billion of its exposure in certain private
equity funds. For more information on these transactions, see Note 5  Securities. These
commitments generally relate to the Corporations Global Principal Investments business which is
comprised of a diversified portfolio of investments in private equity, real estate and other
alternative investments. These investments are made either directly in a company or held through a
fund.

Where the Corporation has a binding equity bridge commitment and there is a market disruption
or other unexpected event, there is higher potential for loss, unless an orderly disposition of
the exposure can be made. At June 30, 2010, the Corporation did not have any unfunded bridge
equity commitments. The Corporation had funded equity bridges of $1.2 billion that were committed
prior to the market disruption. These equity bridges were considered held for investment and
classified in other assets. During the fourth quarter of 2009, these equity bridges were written
down to a zero balance. In the three and six months ended June 30, 2009, the Corporation recorded
a total of $113 million and $263 million in losses in equity investment income related to these
investments.

In 2005, the Corporation entered into an agreement for the committed purchase of retail
automotive loans over a five-year period that ended on June 22, 2010. Under this agreement, the
Corporation purchased $6.6 billion of such loans during the six months ended June 30, 2010 and
also the year ended December 31, 2009. All loans purchased under this agreement were subject to a
comprehensive set of credit criteria. This agreement was accounted for as a derivative liability
with a fair value of $189 million at December 31, 2009. As of June 30, 2010, the Corporation was
no longer committed for any additional purchases and the derivative liability was closed.

At June 30, 2010 and December 31, 2009, the Corporation had commitments to purchase loans
(e.g., residential mortgage and commercial real estate) of $3.2 billion and $2.2 billion, which
upon settlement will be included in loans or LHFS.

Operating Leases

The Corporation is a party to operating leases for certain of its premises and equipment.
Commitments under these leases are approximately $1.5 billion, $2.8 billion, $2.4 billion, $1.9
billion and $1.4 billion for the remainder of 2010 through 2014, respectively, and $7.7 billion in
the aggregate for all years thereafter.

Other Commitments

At June 30, 2010 and December 31, 2009, the Corporation had commitments to enter into
forward-dated resale and securities borrowing agreements of $86.8 billion and $51.8 billion. In
addition, the Corporation had commitments to enter into forward-dated repurchase and securities
lending agreements of $56.2 billion and $58.3 billion. All of these commitments expire within the
next 12 months.

The Corporation has entered into agreements with providers of market data, communications,
systems consulting and other office-related services. At both June 30, 2010 and December 31, 2009,
the minimum fee commitments over the remaining terms of these agreements totaled $2.3 billion.

Other Guarantees

Bank-owned Life Insurance Book Value Protection

The Corporation sells products that offer book value protection to insurance carriers who
offer group life insurance policies to corporations, primarily banks. The book value protection is
provided on portfolios of intermediate investment-grade fixed-income securities and is intended to
cover any shortfall in the event that policyholders surrender their policies and market value is
below book value. To manage its exposure, the Corporation imposes significant restrictions on
surrenders and the manner in which the portfolio is liquidated and the funds are accessed. In
addition, investment parameters of the underlying portfolio are restricted. These constraints,
combined with structural protections, including a cap on the amount of risk assumed on each
policy, are designed to provide adequate buffers and guard against payments even under extreme
stress scenarios. These guarantees are recorded as derivatives and carried at fair value in the
trading portfolio. At June 30, 2010 and December 31, 2009, the notional amount of these guarantees
totaled $15.7 billion and $15.6 billion and the Corporations maximum exposure related to these
guarantees totaled $5.0 billion and $4.9 billion with estimated maturity dates between 2030 and
2040. As of June 30, 2010, the Corporation has not made a payment under these products. The
probability of surrender has increased due to the deteriorating financial health of policyholders,
but remains a small percentage of total notional.

Employee Retirement Protection

The Corporation sells products that offer book value protection primarily to plan sponsors of
Employee Retirement Income Security Act of 1974 (ERISA) governed pension plans, such as 401(k)
plans and 457 plans. The book value protection is provided on portfolios of
intermediate/short-term investment-grade fixed-income securities and is intended to cover any
shortfall in the event that plan participants continue to withdraw funds after all securities have
been liquidated and there is remaining book value. The Corporation retains the option to exit the
contract at any time. If the Corporation exercises its option, the purchaser can require the
Corporation to purchase high quality fixed-income securities, typically government or
government-backed agency securities, with the proceeds of the liquidated assets to assure the
return of
principal. To manage its exposure, the Corporation imposes significant restrictions and
constraints on the timing

of the withdrawals, the manner in which the portfolio is liquidated and the funds are accessed,
and the investment parameters of the underlying portfolio. These constraints, combined with
structural protections, are designed to provide adequate buffers and guard against payments even
under extreme stress scenarios. These guarantees are recorded as derivatives and carried at fair
value in the trading portfolio. At June 30, 2010 and December 31, 2009, the notional amount of
these guarantees totaled $36.5 billion and $36.8 billion with estimated maturity dates between
2010 and 2014 if the exit option is exercised on all deals. As of June 30, 2010, the Corporation
has not made a payment under these products and has assessed the probability of payments under
these guarantees as remote.

Merchant Services

On June 26, 2009, the Corporation contributed its merchant processing business to a joint
venture in exchange for a 46.5 percent ownership interest in the joint venture. During the second
quarter of 2010, the joint venture purchased the interest held by one of the three initial
investors bringing the Corporations ownership interest up to 49 percent. For additional
information on the joint venture agreement, see Note 5  Securities.

The Corporation, on behalf of the joint venture, provides credit and debit card processing
services to various merchants by processing credit and debit card transactions on the merchants
behalf. In connection with these services, a liability may arise in the event of a billing dispute
between the merchant and a cardholder that is ultimately resolved in the cardholders favor and
the merchant defaults on its obligation to reimburse the cardholder. A cardholder, through its
issuing bank, generally has until the later of up to six months after the date a transaction is
processed or the delivery of the product or service to present a chargeback to the joint venture
as the merchant processor. If the joint venture is unable to collect this amount from the
merchant, it bears the loss for the amount paid to the cardholder. The joint venture is primarily
liable for any losses on transactions from the contributed portfolio that occur after June 26,
2009. However, if the joint venture fails to meet its obligation to reimburse the cardholder for
disputed transactions, then the Corporation could be held liable for the disputed amount. For the
three and six months ended June 30, 2010, the Corporation processed $82.8 billion and $161.9
billion of transactions and recorded losses of $5 million and $8 million. For the three and six
months ended June 30, 2009, the Corporation processed $79.6 billion and $154.4 billion of
transactions and recorded losses of $7 million and $14 million.

At June 30, 2010 and December 31, 2009, the Corporation, on behalf of the joint venture, held
as collateral $21 million and $26 million of merchant escrow deposits which may be used to offset
amounts due from the individual merchants. The joint venture also has the right to offset any
payments with cash flows otherwise due to the merchant. Accordingly, the Corporation believes that
the maximum potential exposure is not representative of the actual potential loss exposure. The
Corporation believes the maximum potential exposure for chargebacks would not exceed the total
amount of merchant transactions processed through Visa and MasterCard for the last six months,
which represents the claim period for the cardholder, plus any outstanding delayed-delivery
transactions. As of June 30, 2010 and December 31, 2009, the maximum potential exposure totaled
approximately $126.0 billion and $131.0 billion. The Corporation does not expect to make material
payments in connection with these guarantees. The maximum potential exposure disclosed above does
not include volumes processed by First Data contributed portfolios.

Brokerage Business

For a portion of the Corporations brokerage business, the Corporation has
contracted with a third party to provide clearing services that include underwriting margin loans
to the Corporations clients. This contract stipulates that the Corporation will indemnify the
third party for any margin loan losses that occur in its issuing margin to the Corporations
clients. The maximum potential future payment under this indemnification was $804 million and $657
million at June 30, 2010 and December 31, 2009. Historically, any payments made under this
indemnification have not been material. As these margin loans are highly collateralized by the
securities held by the brokerage clients, the Corporation has assessed the probability of making
such payments in the future as remote. This indemnification would end with the termination of the
clearing contract which is expected to occur in the third quarter of 2010.

Other Derivative Contracts

The Corporation funds selected assets, including securities issued by CDOs and CLOs, through
derivative contracts, typically total return swaps, with third parties and SPEs that are not
consolidated on the Corporations Consolidated Balance Sheet. At June 30, 2010 and December 31,
2009, the total notional amount of these derivative contracts was approximately $4.1 billion and
$4.9 billion with commercial banks and $1.5 billion and $2.8 billion with SPEs. The underlying
securities are senior securities and substantially all of the Corporations exposures are insured.
Accordingly, the Corporations exposure to loss consists principally of counterparty risk to the
insurers. In certain circumstances, generally
as a result of ratings downgrades, the Corporation may be required to purchase the underlying
assets, which would not

result in additional gain or loss to the Corporation as such exposure is already reflected in the
fair value of the derivative contracts.

Other Guarantees

The Corporation sells products that guarantee the return of principal to investors at a
preset future date. These guarantees cover a broad range of underlying asset classes and are
designed to cover the shortfall between the market value of the underlying portfolio and the
principal amount on the preset future date. To manage its exposure, the Corporation requires that
these guarantees be backed by structural and investment constraints and certain pre-defined
triggers that would require the underlying assets or portfolio to be liquidated and invested in
zero-coupon bonds that mature at the preset future date. The Corporation is required to fund any
shortfall at the preset future date between the proceeds of the liquidated assets and the purchase
price of the zero-coupon bonds. These guarantees are recorded as derivatives and carried at fair
value in the trading portfolio. At June 30, 2010 and December 31, 2009, the notional amount of
these guarantees totaled $1.9 billion and $2.1 billion. These guarantees have various maturities
ranging from two to five years. As of June 30, 2010 and December 31, 2009, the Corporation had not
made a payment under these products and has assessed the probability of payments under these
guarantees as remote.

The Corporation has entered into additional guarantee agreements, including lease-end
obligation agreements, partial credit guarantees on certain leases, real estate joint venture
guarantees, sold risk participation swaps and sold put options that require gross settlement. The
maximum potential future payment under these agreements was approximately $3.5 billion and $3.6
billion at June 30, 2010 and December 31, 2009. The estimated maturity dates of these obligations
are between 2010 and 2033. The Corporation has made no material payments under these guarantees.

In addition, the Corporation has guaranteed the payment obligations of certain subsidiaries
of Merrill Lynch on certain derivative transactions. The aggregate notional amount of such
derivative liabilities was approximately $2.2 billion and $2.5 billion at June 30, 2010 and
December 31, 2009.

Litigation and Regulatory Matters

The
following supplements the disclosure in Note 14  Commitments and Contingencies to
the Consolidated Financial Statements of the Corporations 2009 Annual Report on Form 10-K and in
Note 11  Commitments and Contingencies to the Consolidated Financial Statements of the
Corporations Quarterly Report on Form 10-Q for the quarter ended March 31, 2010
(collectively, the prior commitments and contingencies disclosures).

In the ordinary course of business, the Corporation and its subsidiaries are routinely
defendants in or parties to many pending and threatened legal actions and proceedings, including
actions brought on behalf of various classes of claimants. These actions and proceedings are
generally based on alleged violations of consumer protection, securities, environmental, banking,
employment and other laws. In some of these actions and proceedings, claims for substantial
monetary damages are asserted against the Corporation and its subsidiaries.

In the ordinary course of business, the Corporation and its subsidiaries are also subject to
regulatory examinations, information gathering requests, inquiries and investigations. Certain
subsidiaries of the Corporation are registered broker/dealers or investment advisors and are
subject to regulation by the Securities and Exchange Commission, the Financial Industry Regulatory
Authority (FINRA), the New York Stock Exchange, the Financial Services Authority and other
domestic, international and state securities regulators. In connection with formal and informal
inquiries by those agencies, such subsidiaries receive numerous requests, subpoenas and orders for
documents, testimony and information in connection with various aspects of their regulated
activities.

In view of the inherent difficulty of predicting the outcome of such litigation and
regulatory matters, particularly where the claimants seek very large or indeterminate damages or
where the matters present novel legal theories or involve a large number of parties, the
Corporation generally cannot predict what the eventual outcome of the pending matters will be,
what the timing of the ultimate resolution of these matters will be, or what the eventual loss,
fines or penalties related to each pending matter may be.

In
accordance with applicable accounting guidance, the Corporation
establishes an accrued liability for
litigation and regulatory matters when those matters present loss contingencies that are both
probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts
accrued. When a loss contingency is not both probable and estimable, the
Corporation does not establish an accrued liability. As a litigation or regulatory matter develops, the
Corporation, in conjunction with

any outside counsel handling the matter, evaluates on an ongoing basis whether such matter
presents a loss contingency that is probable and estimable. If, at the time of evaluation, the
loss contingency related to a litigation or regulatory matter is not both probable and estimable,
the matter will continue to be monitored for further developments that would make such loss
contingency both probable and estimable. Once the loss contingency related to a litigation or
regulatory matter is deemed to be both probable and estimable, the Corporation will establish
an accrued liability with respect to such loss contingency and continue to monitor the matter for further
developments that could affect the amount of the accrued liability that has been previously established.
Excluding fees paid to external legal service providers, litigation-related expenses of $102
million and $690 million were recognized for the three and six months ended June 30, 2010 as
compared to $159 million and $370 million for the same periods in 2009.

In some of the matters described below, and in the prior commitments and contingencies
disclosures, including but not limited to the Lehman Brothers Holdings, Inc. matters, loss
contingencies are not both probable and estimable in the view of management, and accordingly, an
accrued liability has not been established for those matters. For those disclosed litigation
matters included herein, and in the prior commitments and contingencies disclosures, for which a
loss is reasonably possible in future periods, whether in excess of a related accrued liability or
where there is no accrued liability, and for which the Corporation is able to estimate a range of
possible loss, the current estimated range is $250 million to $1.4 billion. This aggregate range
represents managements estimate of a possible range of loss with respect to such matters. This
estimated range of possible loss is based upon currently available information. Moreover, the
litigation matters underlying the estimated range will change from time to time, and actual
results may vary significantly. Information is provided below, or in the prior commitments and
contingencies disclosures, regarding the nature of these contingencies and, where specified, the
amount of the claim associated with these loss contingencies. Based on current knowledge,
management does not believe that loss contingencies arising from pending litigation and regulatory
matters, including the litigation and regulatory matters described below, will have a material
adverse effect on the consolidated financial position or liquidity of the Corporation. However, in
light of the inherent uncertainties involved in these matters, and the very large or indeterminate
damages sought in some or all of these matters, an adverse outcome in some or all of these matters
could be material to the Corporations results of operations or cash flows for any particular
reporting period.

Adelphia Litigation

On May 26, 2010, the decision of the court dismissing approximately 650 defendants was
affirmed by the U.S. Court of Appeals for the Second Circuit. Trial is now scheduled for October
25, 2010.

Countrywide Bond Insurance Litigation

On May 28, 2010, defendants filed a notice of appeal from the adverse portions of the order
issued by the court on April 29, 2010 in MBIA Insurance Corporation, Inc., v. Countrywide Home
Loans. On June 11, 2010, MBIA Insurance Corporation (MBIA) filed a notice of cross-appeal.

On March 31, 2010, in the Syncora Guarantee action, the court issued an order granting in
part and denying in part defendants motion to dismiss. Both parties filed notices of appeal
concerning aspects of the order. On May 6, 2010, Syncora Guarantee Inc. filed an amended complaint
reasserting its previously dismissed claims and adding a successor liability claim against the
Corporation.

On April 30, 2010, in the Financial Guaranty Insurance Co. action, Financial Guaranty
Insurance Company (FGIC) filed an amended complaint, which adds the Corporation, Countrywide
Financial Corporation, Countrywide Securities Corporation (CSC) and Countrywide Bank F.S.B. as
defendants. In the amended complaint, FGIC reasserts its previously dismissed claims and asserts a
successor liability claim against the Corporation.

On May 17, 2010, in the MBIA Insurance Corporation, Inc. v. Bank of America action, the court
issued an order sustaining in part and overruling in part defendants demurrer, and dismissing the
case in its entirety with leave to amend. On June 21, 2010, MBIA filed an amended complaint
re-asserting its previously dismissed claims, including a successor liability claim against the
Corporation, and adding Countrywide Capital Markets, LLC as a defendant.

Countrywide Equity and Debt Securities Matters

On
August 2, 2010, the district court granted preliminary approval of
the settlement agreement in In re Countrywide Financial Corp. Securities Litigation.

Countrywide FTC Investigation

On April 27, 2010, Countrywide Home Loans, Inc. (CHL) and BAC Home Loans Servicing, LP
reached an agreement in principle with the Federal Trade Commission (FTC) to resolve the FTCs
investigation into CHLs and BAC Home Loans Servicing, LPs servicing practices. The agreement is
evidenced by a consent order under which CHL and BAC Home Loans Servicing, LP agreed, without
admitting any wrongdoing, to settle the matter for an amount that is not material to the
Corporations consolidated financial statements. The amount was paid to the FTC as equitable
relief for consumers whose loans were serviced by CHL and Countrywide Home Loans Servicing, LP prior to their
acquisition by

the Corporation. The payment to the FTC is not a penalty or a fine. As part of the settlement, CHL
and BAC Home Loans Servicing, LP also agreed to a number of additional undertakings relating to
the servicing of residential mortgage loans that are in payment default or under which the
borrower is a debtor in a Chapter 13 bankruptcy case. The U.S. District Court for the Central
District of California entered the consent order on June 15,
2010.

Countrywide Mortgage-Backed Securities Litigation

On
July 13, 2010, plaintiffs filed a consolidated amended complaint in
the Maine State Retirement System v. Countrywide Financial Corporation action.

On June 9, 2010, plaintiffs filed amended complaints in the Federal Home Loan Bank of San
Francisco action.

On June 10, 2010, plaintiffs filed amended complaints in the Federal Home Loan Bank of
Seattle action.

IndyMac Litigation

On June 21, 2010, the court dismissed all claims brought against the Corporation because
plaintiffs failed to plead facts to support their allegation that the Corporation is the
successor-in-interest to Merrill Lynch and Countrywide. A motion to intervene and a motion to amend have been filed. If
granted, they would add new plaintiffs and new claims against Merrill Lynch Pierce, Fenner and Smith
Incorporated and CSC.

Lehman Brothers Holdings, Inc. Litigation

On June 4, 2010, defendants filed a motion to dismiss the third amended complaint.

On June 1, 2010, the district court issued an opinion explaining its March 31, 2010 order in
which the court dismissed claims related to 65 of 84 offerings with prejudice on the grounds that
plaintiffs lacked standing as no named plaintiff purchased securities in those offerings. The
opinion also allows lead plaintiffs to file an amended complaint as to certain parties. As a
result, on July 6, 2010, lead plaintiffs filed a consolidated
amended complaint relating to the offerings remaining in the case.

Municipal Derivatives Litigation

All six previously disclosed civil cases recently filed in California state court have been
transferred and consolidated in the In re Municipal Derivatives Antitrust Litigation. In May 2010,
five additional cases were filed in the U.S. District Court for the Northern District of
California on behalf of additional California cities and counties alleging anticompetitive conduct
in violation of the Sherman Act and Californias Cartwright Act. The five cases, which seek
unspecified damages, including treble damages, have been transferred and consolidated in In re
Municipal Derivatives Antitrust Litigation.

On June 21, 2010, the State of West Virginia filed an amended complaint, in which it added
additional defendants, including Merrill Lynch. The State also added a claim under the Sherman Act
to its original claim under the West Virginia Antitrust Act, and seeks treble damages on both
counts.

Parmalat Finanziaria S.p.A. Matters

Proceedings in Italy

On May 26, 2010, the Court of Appeals, Milan affirmed the lower courts ruling acquitting the
three former employees of the Corporation.

Proceedings in the United States

On June 3, 2010, the Corporation reached agreements to settle the following Parmalat private
placement related cases for an aggregate amount that is not material to the Corporations
consolidated financial statements: (1) Principal Global Investors, LLC, et al. v. Bank of America
Corporation, et al. in the U.S. District Court for the Southern District of Iowa; (2) Monumental
Life Insurance Company, et al. v. Bank of America Corporation, et al. in the U.S. District Court
for the Northern District of Iowa; (3) Prudential Insurance Company of America and Hartford Life Insurance
Company v. Bank of

America Corporation, et al. in the U.S. District Court for the Northern District of Illinois (as
previously disclosed, Hartfords claims in this case have already been dismissed); and (4) John
Hancock Life Insurance Company, et al. v. Bank of America Corporation et al. in the U.S. District
Court for the District of Massachusetts.

Tribune PHONES Litigation

On April 19, 2010, the bankruptcy court ruled that the defendants are not required to answer
the complaint pending further order of the court. The court also ruled that the examiner appointed
in the pending Tribune chapter 11 cases should investigate and report on whether the plaintiff,
Wilmington Trust Company, violated the automatic stay in filing the complaint, among other things.

NOTE
12  Shareholders Equity and Earnings Per Common Share

Common Stock

In July 2010, the Board declared a third quarter cash dividend of $0.01 per common share
payable on September 24, 2010 to common shareholders of record on September 3, 2010. In April
2010, the Board declared a second quarter cash dividend of $0.01 per common share, which was paid
on June 25, 2010 to common shareholders of record on June 4, 2010. In January 2010, the Board
declared a first quarter cash dividend of $0.01 per common share, which was paid on March 26, 2010
to common shareholders of record on March 5, 2010.

On April 28, 2010, at the Corporations 2010 Annual Meeting of Stockholders, the Corporation
obtained shareholder approval of an amendment to the Corporations amended and restated
certificate of incorporation to increase the number of authorized shares of common stock from 11.3
billion to 12.8 billion.

In December 2009, the Corporation repurchased the non-voting perpetual preferred stock
previously issued to the U.S. Treasury (TARP Preferred Stock) through the use of $25.7 billion in
excess liquidity and $19.3 billion in proceeds from the sale of 1.3 billion Common Equivalent
Securities (CES) valued at $15.00 per unit. The CES consisted of depositary shares representing
interests in shares of Common Equivalent Junior Preferred Stock, Series S (Common Equivalent
Stock) and contingent warrants to purchase an aggregate of 60 million shares of the Corporations
common stock. On February 23, 2010, the Corporation held a special meeting of stockholders at
which it obtained shareholder approval of an amendment to the Corporations amended and restated
certificate of incorporation to increase the number of authorized shares of common stock, and
accordingly, the Common Equivalent Stock automatically converted in full into 1.286 billion shares
of common stock on February 24, 2010 following the filing of the amendment with the Delaware
Secretary of State on February 23, 2010. In addition, as a result, the contingent warrants expired
without having become exercisable and the CES ceased to exist. For additional information on
preferred stock, see Note 15  Shareholders Equity and Earnings Per Common Share to the
Consolidated Financial Statements of the Corporations 2009 Annual Report on Form 10-K.

Through a 2008 authorized share repurchase program, the Corporation had the ability to
repurchase shares, subject to certain restrictions, from time to time, in the open market or in
private transactions. The 2008 authorized repurchase program expired on January 23, 2010. In the
six months ended June 30, 2010, the Corporation did not repurchase any shares of common stock and
issued approximately 96.8 million shares under employee stock plans. At June 30, 2010, the
Corporation had reserved 1.6 billion of unissued common shares for future issuances under employee
stock plans, common stock warrants, convertible notes and preferred stock.

During the three months ended March 31, 2010, the Corporation issued approximately 191
million RSUs to certain employees under the Key Associate Stock Plan. These awards generally vest
in three equal annual installments beginning one year from the grant date. Vested RSUs will be
settled in cash unless the Corporation authorizes settlement in common shares. Approximately 58
million of these RSUs have been authorized to settle in common shares. Certain awards contain clawback
provisions which permit the Corporation to cancel all or a portion of the award under specified
circumstances. The compensation cost for cash-settled awards and awards subject to certain
clawback provisions is accrued over the vesting period and adjusted to fair value based upon
changes in the share price of the Corporations common stock. The compensation cost for the
remaining awards is fixed and based on the share price of the common stock on the date of grant,
or the date upon which settlement in common stock has been authorized. The Corporation hedges a
portion of its exposure to variability in the expected cash flows for unvested awards using a
combination of economic and cash flow hedges as described in Note 4  Derivatives. Subsequent to
June 30, 2010, the Corporation authorized approximately 42 million

additional RSUs to be settled in common shares and terminated a portion of the corresponding
economic and cash flow hedges.

Preferred Stock

During the first and second quarters of 2010, the aggregate dividends declared on
preferred stock were $348 million and $340 million or a total of $688 million for the six months
ended June 30, 2010.

Accumulated OCI

The following table presents the changes in accumulated OCI for the six months ended
June 30, 2010 and 2009, net-of-tax.

Available-for-

Available-for-

Sale Debt

Sale Marketable

Employee

Foreign

(Dollars in millions)

Securities

Equity Securities

Derivatives

Benefit Plans(1)

Currency(2)

Total

Balance, December 31, 2009

$

(628

)

$

2,129

$

(2,535

)

$

(4,092

)

$

(493

)

$

(5,619

)

Cumulative adjustment for new consolidation guidance

(116

)

-

-

-

-

(116

)

Net change in fair value recorded in accumulated OCI

3,678

(1,294

)

(746

)

-

(112

)

1,526

Net realized (gains) losses reclassified into earnings

(28

)

(836

)

241

127

258

(238

)

Balance, June 30, 2010

$

2,906

$

(1

)

$

(3,040

)

$

(3,965

)

$

(347

)

$

(4,447

)

Balance, December 31, 2008

$

(5,956

)

$

3,935

$

(3,458

)

$

(4,642

)

$

(704

)

$

(10,825

)

Cumulative
adjustment for accounting change  OTTI (3)

(71

)

-

-

-

-

(71

)

Net change in fair value recorded in accumulated OCI

2,835

793

(52

)

161

(101

)

3,636

Net realized (gains) losses reclassified into earnings

(238

)

(4,383

)

539

115

-

(3,967

)

Balance, June 30, 2009

$

(3,430

)

$

345

$

(2,971

)

$

(4,366

)

$

(805

)

$

(11,227

)

(1)

Net change in fair value represents after-tax adjustments based on the final
year-end actuarial valuations.

(2)

Net change in fair value represents only the impact of changes in foreign exchange
rates on the Corporations net investment in foreign operations.

(3)

Effective January 1, 2009, the Corporation adopted new accounting guidance on the
recognition of OTTI losses on debt securities. For additional information on the adoption of
this accounting guidance, see Note 1  Summary of Significant Accounting Principles to the
Consolidated Financial Statements of the Corporations 2009 Annual Report on Form 10-K and
Note 5  Securities.

Earnings Per Common Share

For the three and six months ended June 30, 2010, average options to purchase 269
million and 277 million shares of common stock were outstanding but not included in the
computation of earnings per common share (EPS) because they were antidilutive under the treasury
stock method compared to 319 million and 321 million for the same periods in 2009. For both the
three and six months ended June 30, 2010, average warrants to purchase 122 million shares of
common stock were outstanding but not included in the computation of EPS because they were
antidilutive under the treasury stock method compared to 272 million and 258 million for the same
periods in 2009. For both the three and six months ended June 30, 2010, 117 million average
dilutive potential common shares associated with the 7.25% Non-cumulative Perpetual Convertible
Preferred Stock, Series L and the Merrill Lynch & Co., Inc. Mandatory Convertible Preferred Stock
Series 2 and Series 3 were excluded from the diluted share count because the result would have
been antidilutive under the if-converted method compared to 164 million and 176 million for the
same periods in 2009. For purposes of computing basic EPS, CES were considered to be participating
securities prior to February 24, 2010 and as such were allocated earnings as required by the
two-class method. For purposes of computing diluted EPS, the dilutive effect of the CES, which
were outstanding prior to February 24, 2010, was calculated using the if-converted method which
was more dilutive than the two-class method for the six months ended June 30, 2010. In addition,
for both the three and six months ended June 30, 2009, the Corporation recorded an increase to
retained earnings and net income available to common shareholders of $576 million related to the
Corporations preferred stock exchange for common stock.

The Corporation sponsors noncontributory trusteed pension plans that cover substantially
all officers and employees, a number of noncontributory nonqualified pension plans, and
postretirement health and life plans. Additional information on these plans is presented in Note
17  Employee Benefit Plans to the Consolidated Financial Statements of the Corporations 2009
Annual Report on Form 10-K.

As a result of the Merrill Lynch acquisition, the Corporation assumed the obligations related
to the plans of Merrill Lynch. These plans include a terminated U.S. pension plan, non-U.S.
pension plans, nonqualified pension plans and postretirement plans. The non-U.S. pension plans
vary based on the country and local practices.

In 1988, Merrill Lynch purchased a group annuity contract that guarantees the payment of
benefits vested under the terminated U.S. pension plan. The Corporation, under a supplemental
agreement, may be responsible for, or benefit from actual experience and investment performance of
the annuity assets. The Corporation contributed $0 and $120 million for the six months ended June
30, 2010 and 2009, under this agreement. Additional contributions may be required in the future
under this agreement.

Net periodic benefit cost of the Corporations plans for the three and six months ended June
30, 2010 and 2009 included the following components.

Three Months Ended June 30

Nonqualified and

Postretirement

Qualified Pension

Other Pension

Health and Life

Plans

Plans(1)

Plans

(Dollars in millions)

2010

2009

2010

2009

2010

2009

Components of net periodic benefit cost

Service cost

$

95

$

87

$

8

$

7

$

3

$

3

Interest cost

187

183

64

59

23

22

Expected return on plan assets

(315

)

(308

)

(57

)

(54

)

(3

)

(2

)

Amortization of transition obligation

-

-

-

-

8

8

Amortization of prior service cost (credits)

7

11

(2

)

(2

)

3

-

Recognized net actuarial loss (gain)

92

89

3

-

(17

)

(24

)

Recognized termination and settlement benefit cost

-

8

3

-

-

-

Net periodic benefit cost

$

66

$

70

$

19

$

10

$

17

$

7

Six Months Ended June 30

Nonqualified and

Postretirement

Qualified Pension

Other Pension

Health and Life

Plans

Plans(1)

Plans

(Dollars in millions)

2010

2009

2010

2009

2010

2009

Components of net periodic benefit cost

Service cost

$

198

$

194

$

16

$

14

$

7

$

8

Interest cost

374

371

125

119

45

45

Expected return on plan assets

(631

)

(616

)

(114

)

(108

)

(5

)

(4

)

Amortization of transition obligation

-

-

-

-

16

16

Amortization of prior service cost (credits)

14

20

(4

)

(4

)

3

-

Recognized net actuarial loss (gain)

181

188

3

2

(25

)

(38

)

Recognized termination and settlement benefit cost

-

8

13

-

-

-

Net periodic benefit cost

$

136

$

165

$

39

$

23

$

41

$

27

(1)

Includes nonqualified pension plans, the terminated U.S. pension plan and non-U.S. pension plans as described above.

In 2010, the Corporation expects to contribute approximately $230 million to its
nonqualified and other pension plans and $116 million to its postretirement health and life plans.
For the six months ended June 30, 2010, the Corporation contributed $142 million and $58 million
to these plans. The Corporation does not expect to be required to contribute to its qualified
pension plans in 2010.

NOTE
14  Fair Value Measurements

Under applicable accounting guidance, fair value is defined as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. The Corporation determines the fair values of its financial
instruments based on the fair value hierarchy established under applicable accounting guidance
which requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. There are three levels of inputs that may be used
to measure fair value. For more information regarding the fair value hierarchy and how the
Corporation measures fair value, see Note 1  Summary of Significant Accounting Principles to the
Consolidated Financial Statements of the Corporations 2009 Annual Report on Form 10-K. The
Corporation accounts for certain corporate loans and loan commitments, LHFS, structured reverse
repurchase agreements, long-term deposits and long-term debt under the fair value option.

Level 1, 2 and 3 Valuation Techniques

Financial instruments are considered Level 1 when the valuation is based on quoted prices in
active markets for identical assets or liabilities. Level 2 financial instruments are valued using
quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or
models using inputs that are observable or can be corroborated by observable

market data for substantially the full term of the assets or liabilities. Financial instruments
are considered Level 3 when their values are determined using pricing models, discounted cash flow
methodologies or similar techniques, and at least one significant model assumption or input is
unobservable and when determination of the fair value requires significant management judgment or
estimation.

The Corporation uses market indices for direct inputs to certain models where the cash
settlement is directly linked to appreciation or depreciation of that particular index (primarily
in the context of structured credit products). In those cases, no material adjustments are made to
the index-based values. In other cases, market indices are used as inputs to the valuation, but
are adjusted for trade specific factors such as rating, credit quality, vintage and other factors.

The fair values of trading account assets and liabilities are primarily based on actively
traded markets where prices are based on either direct market quotes or observed transactions. The
fair values of AFS debt securities are generally based on quoted market prices or market prices
for similar assets. Liquidity is a significant factor in the determination of the fair values of
trading account assets and liabilities and AFS debt securities. Market price quotes may not be
readily available for some positions, or positions within a market sector where trading activity
has slowed significantly or ceased. Some of these instruments are valued using a discounted cash
flow model, which estimates the fair value of the securities using internal credit risk, interest
rate and prepayment risk models that incorporate managements best estimate of current key
assumptions such as default rates, loss severity and prepayment rates. Principal and interest cash
flows are discounted using an observable discount rate for similar instruments with adjustments
that management believes a market participant would consider in determining fair value for the
specific security. Others are valued using a net asset value approach which considers the value of
the underlying securities. Underlying assets are valued using external pricing services, where
available, or matrix pricing based on the vintages and ratings. Situations of illiquidity
generally are triggered by the markets perception of credit uncertainty regarding a single
company or a specific market sector. In these instances, fair value is determined based on limited
available market information and other factors, principally from reviewing the issuers financial
statements and changes in credit ratings made by one or more ratings agencies.

Derivative Assets and Liabilities

The fair values of derivative assets and liabilities traded in the over-the-counter (OTC)
market are determined using quantitative models that utilize multiple market inputs including
interest rates, prices and indices to generate continuous yield or pricing curves and volatility
factors to value the position. The majority of market inputs are actively quoted and can be
validated through external sources, including brokers, market
transactions and third party pricing
services. Estimation risk is greater for derivative asset and liability positions that are either
option-based or have longer maturity dates where observable market inputs are less readily
available or are unobservable, in which case, quantitative-based extrapolations of rate, price or
index scenarios are used in determining fair values. The fair values of derivative assets and
liabilities include adjustments for market liquidity, counterparty credit quality and other deal
specific factors, where appropriate. The Corporation incorporates within its fair value
measurements of OTC derivatives the net credit differential between the counterparty credit risk
and the Corporations own credit risk. An estimate of severity of loss is also used in the
determination of fair value, primarily based on market data.

Corporate Loans and Loan Commitments

The fair value of loans and loan commitments are based on market prices, where available, or
discounted cash flow analyses using market-based credit spreads of comparable debt instruments or
credit derivatives of the specific borrower or comparable borrowers. Results of discounted cash
flow calculations may be adjusted, as appropriate, to reflect other market conditions or the
perceived credit risk of the borrower.

Mortgage Servicing Rights

The fair values of MSRs are determined using models that rely on estimates of prepayment
rates, the resultant weighted-average lives of the MSRs and the option adjusted spread (OAS)
levels. For more information on MSRs, see Note 16  Mortgage Servicing Rights.

The fair values of LHFS are based on quoted market prices, where available, or are determined
by discounting estimated cash flows using interest rates approximating the Corporations current
origination rates for similar loans adjusted to reflect the inherent credit risk.

Other Assets

The fair values of AFS marketable equity securities are generally based on quoted market
prices or market prices for similar assets. However, non-public investments are initially valued
at the transaction price and subsequently adjusted when evidence is available to support such
adjustments.

Securities Financing Agreements

The fair values of certain reverse repurchase agreements, repurchase agreements and
securities borrowed transactions are determined using quantitative models, including discounted
cash flow models that require the use of multiple market inputs including interest rates and
spreads to generate continuous yield or pricing curves, and volatility factors. The majority of
market inputs are actively quoted and can be validated through external sources, including
brokers, market transactions and third party pricing services.

Deposits, Commercial Paper and Other Short-term Borrowings

The fair values of deposits, commercial paper and other short-term borrowings are determined
using quantitative models, including discounted cash flow models that require the use of multiple
market inputs including interest rates and spreads to generate continuous yield or pricing curves,
and volatility factors. The majority of market inputs are actively quoted and can be validated
through external sources, including brokers, market transactions and third party pricing services.
The Corporation considers the impact of its own credit spreads in the valuation of these
liabilities. The credit risk is determined by reference to observable credit spreads in the
secondary cash market.

Long-term Borrowings

The Corporation issues structured notes that have coupons or repayment terms linked to the
performance of debt or equity securities, indices, currencies or commodities. The fair value of
structured notes is estimated using valuation models for the combined derivative and debt portions
of the notes accounted for under the fair value option. These models incorporate observable and,
in some instances, unobservable inputs including security prices, interest rate yield curves,
option volatility, currency, commodity or equity rates and correlations between these inputs. The
impact of the Corporations own credit spreads is also included based on the Corporations
observed secondary bond market spreads. Structured notes are classified as either Level 2 or Level
3 in the fair value hierarchy.

Asset-backed Secured Financings

The fair values of asset-backed secured financings are based on external broker bids, where
available, or are determined by discounting estimated cash flows using interest rates
approximating the Corporations current origination rates for similar loans adjusted to reflect
the inherent credit risk.

Assets and liabilities carried at fair value on a recurring basis at June 30, 2010, including
financial instruments which the Corporation accounts for under the fair value option, are
summarized in the table below.

June 30, 2010

Fair Value Measurements Using

Netting

Assets/Liabilities at

Dollars in millions)

Level 1(1)

Level 2(1)

Level 3

Adjustments(2)

Fair Value

Assets

Federal funds sold and securities borrowed or purchased
under agreements to resell

$

-

$

68,109

$

-

$

-

$

68,109

Trading account assets:

U.S. government and agency securities

29,851

24,679

-

-

54,530

Corporate securities, trading loans and other

1,399

41,563

9,873

-

52,835

Equity securities

22,794

7,821

726

-

31,341

Foreign sovereign debt

27,116

11,524

952

-

39,592

Mortgage trading loans and asset-backed securities

-

11,570

7,508

-

19,078

Total trading account assets

81,160

97,157

19,059

-

197,376

Derivative assets (3)

1,284

1,821,378

22,741

(1,762,072

)

83,331

Available-for-sale debt securities:

U.S. Treasury securities and agency securities

46,989

3,395

-

-

50,384

Mortgage-backed securities:

Agency

-

153,581

-

-

153,581

Agency-collateralized mortgage obligations

-

40,870

-

-

40,870

Non-agency residential

-

27,384

1,976

-

29,360

Non-agency commercial

-

7,078

50

-

7,128

Foreign securities

134

2,583

233

-

2,950

Corporate bonds

-

6,063

304

-

6,367

Other taxable securities

21

2,791

13,900

-

16,712

Tax-exempt securities

-

6,176

1,237

-

7,413

Total available-for-sale debt securities

47,144

249,921

17,700

-

314,765

Loans and leases

-

-

3,898

-

3,898

Mortgage servicing rights

-

-

14,745

-

14,745

Loans held-for-sale

-

21,483

5,981

-

27,464

Other assets

34,950

13,656

7,702

-

56,308

Total assets

$

164,538

$

2,271,704

$

91,826

$

(1,762,072

)

$

765,996

Liabilities

Interest-bearing deposits in domestic offices

$

-

$

2,081

$

-

$

-

$

2,081

Federal funds purchased and securities loaned or sold
under agreements to repurchase

-

42,741

-

-

42,741

Trading account liabilities:

U.S. government and agency securities

27,203

4,600

-

-

31,803

Equity securities

22,626

1,544

-

-

24,170

Foreign sovereign debt

20,199

2,992

7

-

23,198

Corporate securities and other

411

10,327

73

-

10,811

Total trading account liabilities

70,439

19,463

80

-

89,982

Derivative liabilities (3)

2,566

1,801,718

13,339

(1,754,834

)

62,789

Commercial paper and other short-term borrowings

-

6,752

-

-

6,752

Accrued expenses and other liabilities

24,176

503

1,618

-

26,297

Long-term debt

-

40,080

4,090

-

44,170

Total liabilities

$

97,181

$

1,913,338

$

19,127

$

(1,754,834

)

$

274,812

(1)

Gross transfers included $173 million of derivative assets and $165 million of derivative liabilities transferred from Level 1 to Level 2 during the six months ended June 30, 2010.

(2)

Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.

(3)

For further disaggregation
of derivative assets and liabilities, see Note 4  Derivatives.

Assets and liabilities carried at fair value on a recurring basis at December 31, 2009,
including financial instruments which the Corporation accounts for under the fair value option,
are summarized in the table below.

December 31, 2009

Fair Value Measurements Using

Netting

Assets/Liabilities at

(Dollars in millions)

Level 1

Level 2

Level 3

Adjustments (1)

Fair Value

Assets

Federal funds sold and securities borrowed or
purchased under agreements to resell